Since its launch in 2000, implementing an Enterprise Management Incentive (“EMI”) share option scheme has become by far and away the most popular HMRC tax favoured share incentive plan adopted by companies for UK employees.
Essentially, qualifying companies can set up an EMI scheme whereby options can be granted over shares (worth up to £250,000 per employee up to a cap of £3 million for the company) to eligible employees without giving rise to an income tax or National Insurance Contribution (“NIC”) charge. Such schemes also allow the employee to purchase shares in the company at a discounted value.
EMI option schemes are intended to help companies retain valued/key employees and to incentivise/reward such employees for investing their time and skills in helping the company grow.
Particularly for start-ups, share options can be an important part of the package in attracting high caliber employees who can be persuaded to join a company for a lower cash salary when they see the potential for realizing a significant capital gain in the future (i.e. on an exit event when their options will commonly be exercised).
Share options more closely align the interests of the company’s owners and its employees as both will be more united in wanting to build long-term shareholder value through growing the business in the expectation that everyone will eventually benefit from an exit event.
Given the prevailing economic circumstances resulting from the Covid-19 outbreak, there is an opportunity to agree a low valuation with HMRC for the purposes of granting EMI qualifying options to your employees, giving such employees the opportunity to acquire shares in the company at a low price.
What we can do to help you
We offer in the first instance a 20-minute no cost, no obligation call to discuss your requirements and gain some background information on you and your business. We will then send you our tried and tested EMI option scheme checklist and questionnaire which will form the basis of the legal/contractual documentation governing your scheme. Completing this checklist/questionnaire will help us better understand how you envisage your scheme being structured and ensures that we can put in place well-considered and bespoke documentation to govern the scheme.
Our checklist/questionnaire can be downloaded absolutely free by clicking this link and navigating to the “Free checklist” subheading.
We work alongside an accountancy practice which is well versed in consistently agreeing low valuations with HMRC for the purposes of granting EMI qualifying options. Our contact usually charges a fixed fee of £1,500 plus VAT (£1,800) for carrying out the initial tax and valuation work.
We then charge a time-capped fixed fee of £1,500 plus VAT (£1,800) for advising on and producing the legal/contractual documentation to govern your EMI share option scheme.
Given that we are still a relatively small law firm we can provide a personal touch to our services which means we can 1) be more cost effective than more established firms and 2) be more responsive and always get back to you within a reasonable time frame.
If you would like our assistance with implementing an EMI share option scheme, please send an email to email@example.com or call our office using the details below and we will be delighted to assist.