Out-Law / Your Daily Need-To-Know

Out-Law News 1 min. read

UK makes it easier for smaller companies to offer share incentives

It will be easier for smaller companies to use a tax break to offer company shares to employees under changes to the Enterprise Management Incentive (EMI) options scheme announced as part of the UK government’s 2023 Budget.

The Budget removed some of the technical administrative hurdles companies have to clear before being able to offer EMI options, which were designed to give tax advantages to small, potentially high growth companies offering share options to staff.

Two of the requirements will be removed for EMI options granted on or after 6 April 2023 and existing EMI options granted before 6 April 2023 that have not been exercised.

The government has removed the requirement for the company to set out within the option agreement the details of any restrictions on the shares to be acquired under the EMI option.

It has also removed the requirement for the company to declare that an employee has signed a working time declaration when they are issued an EMI option. It does not remove the working time requirement itself, just the requirement for the declaration to be signed by the option holder. The working time obligation will become an issue of fact only without any administrative burden for supporting paperwork to be signed.

The government made a further change – from 6 April 2024 companies will be given more time to notify UK tax authority HM Revenue and Customs (HMRC) of the grant of an EMI option. Companies have had to notify HMRC within 92 days of the grant of options, but now only have to notify it by 6 July following the end of the tax year in which the option was granted.

This brings the requirement in line with the deadline for companies to file their share plan annual returns.

The government said it made the changes to help small and medium sized companies recruit and retain staff by simplifying the process to grant EMI options.

“Companies will welcome these measures,” said share plans expert Nicky Griffin of Pinsent Masons. “When working on the sale of a business we often find that that the granting of EMI options is an area where the company’s internal administrative processes fall short and the company has not complied with the legislative requirements, Until now this has put the tax advantages of EMI options at risk purely due to administrative oversight.”

We are processing your request. \n Thank you for your patience. An error occurred. This could be due to inactivity on the page - please try again.