Submitted by Sestini And Co
| on Tue, 08/07/2018 - 18:37 | In Shares
, Tax planning and pensions
Following the expiration of EU State Aid approval on 6 April 2018, which was announced by HMRC, there has been considerable uncertainty in relation to tax benefits associated with Enterprise Management Incentive (EMI) and eligibility for tax relief.
What is the EMI scheme?
The EMI is a tax qualified discretionary share option arrangement aimed at small growing companies to help them recruit and retain employees in the UK.
Registered companies can grant share options up to £250,000 per employee in a 3-year period. There won’t be any income tax or national insurance for employees if they buy the shares for at least the market value they had when they were granted the option.
The European Commission grants an extension
The EC recently found that the continuation of the measure is necessary to help UK SMEs attract and retain talented and skilled personnel. It decided that the measure is in line with EU state aid rules and granted an extension which will be valid until the UK is no longer a member state.
This will no doubt be a relief for many small businesses who used this share scheme arrangement for its generous tax advantages.
So what does this decision mean for companies?
The Commission has yet to publish its formal decision which will hopefully clarify whether approval will be applied retrospectively to April 7, 2018.
With the renewal on 15 May 2018, companies that delayed issuing EMI options can now grant them as the options will be eligible for tax relief. However, companies that granted options hoping they would be EMI qualified between 7 April 2018 and 15 May 2018 still need to wait to see what the Commission has decided in relation to the tax treatment of these options.
To be eligible for EMI, qualifying companies must:
- Be independent: More than 50% of its ordinary share capital must not be owned or controlled by another company.
- Have only qualifying subsidiaries: Any subsidiary must be a company which the company controls, either on its own or together with any person connected with it.
- Not exceed £30 million in gross assets: If the company is in a group, this figure applies to the group as a whole
- Have fewer than 250 FTE employees: This includes directors, all employees whether in subsidiaries, in the UK or outside. Employees on maternity or paternity leave and apprentices are excluded.
- Not have excluded trading activities: Exclusions include banking, accountancy service, property development, operating hotels or nursing homes.
Additional conditions also apply around these and other factors.
If you’d like to discuss EMI share options with us and need clarification on this, call us on 01761 241 861 or email us today. We will be pleased to advise you or to invite you into our offices in Paulton, near Bristol and Bath, for a consultation.