05: Enterprise management incentive (EMI) option scheme

The EMI scheme allows companies to grant qualifying options to employees. An EMI scheme does not need formal HMRC approval and is more flexible that an approved company share option scheme.

Any number of employees can participate in the EMI scheme. The options do not have to be offered to all employees and the terms can be individually tailored to the needs and circumstances of the individuals.

The main condition is that no employee must have unexercised options worth more than £100,000 based on the market value of the shares at the time the options have been granted. The total value of these unexercised options for all employees must not exceed £3 million.

Tax benefits of EMI

The tax benefits of the EMI are significant. When the options are granted there is not tax or NIC. Any gain on the shares between the base cost – the cost of the option – is subject to CGT, with the business taper relief starting to count from the date the options were granted, rather than the date of when they are exercised. So, taper relief could apply to the exercise of options that are followed instantly by the sale the shares, which would not be the case under other schemes.