Warning – Tax efficient share options

EMI (Enterprise Management Incentive) Share Options are highly tax efficient and popular share awards used by many small and medium sized businesses but their eligibility is in question.

As tax accountants in Cheltenham, we are informing you that the government has issued a warning about their eligibility for tax benefits in their April 2018 Employment Related Securities Bulletin.

The tax benefits of EMI Schemes rely on EU State Aid approval, and the current approval for the scheme expires on 6 April 2018.  There has been a delay in the process of applying to the European Commission for fresh approval and the response has not yet been received.  While the government does not expect there to be a problem with obtaining the renewed approval, there will be a delay before this is received which presents a problem as it seems the renewed approval, when received, cannot be backdated.

This means there will be a window of time between 6 April 2018 and the date of approval when EMI options granted might not be eligible for the tax benefits and therefore companies could unwittingly put themselves in a position where tax and possibly National Insurance liabilities could be created, both for themselves and for their employees.

Where companies are due to grant any options in the near future, the advice is to delay the grant of those options until the EU approval is confirmed, to avoid the spectre of unwanted tax charges.

This only affects the grant of options.  Existing options granted before now retain their tax advantaged status, so the exercise of options during the next few weeks will not be affected by this delay.

If you or your clients are in the process of granting share options, please speak to us if you think this may affect you.

James Geary is our lead on Corporate Tax and is contactable on or 01242 776000.