Last month the Commission confirmed that it had renewed state aid approval for EMI schemes following a period of uncertainty. Although it issued a statement confirming its approval at the time, the decision letter (15-page / 332KB PDF) behind the announcement was only published recently. The letter provides more detail on firms' obligations when operating EMI schemes, Suzannah Crookes of Pinsent Masons, the law firm behind Out-Law.com, said.
EMI options were introduced by the Finance Act 2000. They are intended to help smaller companies with growth potential to recruit and retain the best employees, and offer generous tax advantages to employees of those companies which qualify.
Unlike the other three UK tax-advantaged employee share scheme (TASS) types, EMI options involve the provision of state aid by the UK to companies granting them. This is because the benefits of EMI options are restricted to companies with certain business activities, unlike the other TASS types. State aid is generally unlawful under the EU treaties, unless it clearly falls within certain exceptions or has been reviewed, in advance of implementation, by the European Commission and found to be compatible with the relevant treaty provisions.
Renewed state aid approval for EMI options was granted by the Commission on 15 May 2018.
Crookes said the decision letter is likely to lead HM Revenue & Customs (HMRC) in the UK to issue new regulations.
"The full decision sets out an additional disclosure requirement in connection with EMI options, to the effect that where more than €500k is given in ‘aid’, the relevant company would be named and other details disclosed," Crookes said. "This includes details of the amount of aid granted to eligible employees, such as in PAYE/NICs, the amount of aid granted to the company in employer NICs, as well as the relevant economic sector."
"There is already a framework in place for HMRC to require further information in these circumstances, but further regulations are now expected to set out the detail. We anticipate some if not all of the information may be gathered via the existing online reporting and returns process, but this is yet to be confirmed. The decision does not otherwise impose any new or amended qualifying conditions for the grant of EMI options," she said.
Crookes said it is welcome that EMI status remains available to SMEs. She said the options are "very valuable in the recruitment and retention of key employees who play an important role in delivering the growth potential of relevant businesses".
"The new disclosure requirement will involve companies providing additional information in relation to their EMI options, although it is to be hoped that the additional disclosure burden can be minimised, as EMI options are aimed at smaller companies which in some cases may have limited resources to apply to further complex requirements," Crookes said.