Getting back on the growth track – employee share options


As the country slowly begins to emerge from lockdown, businesses are looking for ways to get back to growth after what has for most been a very tough period.  A huge part of this comes down to employees doing their bit to help things to pick up again.

However, cash is tight, so employee incentives are tricky, especially if the business cannot immediately afford bonuses or benefits with an immediate cost.  It is at times like these where share option schemes really come into their own, by giving key employees a stake in the growth of the business that can be realised after a period of time, and is directly related to their hard work and efforts.

The EMI share option scheme is HMRC approved and carries significant tax benefits for both the company and its participating employees.  Effectively a company can grant an option over a number of shares in the company giving an employee the right to buy those shares at a later date, at today’s share price.  The idea being that if growth targets are met, then at the time they buy the shares they are worth a lot more than they are paying for them.

Even better, if the plan gives the right to buy the shares immediately before an exit (sale) for the owners, then the share purchase can be immediately self-funding as the shares are immediately sold for the (hopefully) much higher amount.

The beauty of the scheme is that the share “gain” can potentially have the extra benefit of Entrepreneurs relief (if the relevant conditions are met), meaning a 10% rate of tax may apply. Without this approved scheme, the gain would be liable to Income Tax and potentially National Insurance at much higher rates.

As we emerge from a tough period for businesses, it is likely that share values will be at a low point right now.  This makes it an ideal time for companies to create an EMI scheme, as the growth potential from today is at its highest, meaning the tax advantages are all the greater.

At Randall & Payne we have dealt with EMI schemes for many years, but activity in this area has been growing significantly in the last month or two.  Could 2020-21 be the “year of the EMI”?

Please contact James Geary or Gina Gardner for a free, no obligation discussion to explore whether an EMI scheme may be suitable for your company.  Although many of our staff are still working from home for the majority of the time, our free advice clinics are still available via video call, so do take advantage of one of these to discuss EMI and/or any other issues we may be able to help you with – simply call 01242 776000 or email