An attractive non-cash alternative to a raise in salary or a bonus is to reward employees by granting them HMRC approve EMI share options.

Share options can be a real incentive to the key people of a business and it can really help a growing business. Once an EMI scheme has been set up, it can then be used to attract the best candidates.

EMI works by a company granting share options to an employee. These options are converted into shares at a point in the future; for example on the sale of the company, or after performance targets have been achieved.

The employee then has the option to purchase the shares at the market value of the shares at the time that the shares options were granted. When the shares are exercised no income tax or national insurance is due.

Capital Gains Tax is a downside as a 5% holding in the company needs to be held for a year prior to sale to qualify for a 10% tax rate (as opposed to either 18% or 28%). This is why most options now are exercised after a set period of time or a target has been met – both being real incentives for the employee.

If you would like to discuss EMI schemes, please call Chris Mattos on 01453 763471.