Enterprise Management Incentives allows qualifying companies to offer share options to eligible employees. An option gives the employee the right to acquire shares later at an agreed price.
The arrangement can connect an employee’s reward with growth in the company’s value, but tax treatment depends on meeting detailed conditions.
Check the company and employee
Eligibility concerns the company’s size, independence, activities and shares, as well as the employee’s working commitment and interests in the business.
Limits apply to the value of options. Review the current EMI rules before designing an award; historical company-size and option limits should not be reused.
Set the terms carefully
The exercise price and the shares’ value when the option is granted affect the tax position. A discounted exercise price can create different consequences from an option granted at market value.
Performance conditions and an exercise timetable can form part of the arrangement. Employees should understand when they can acquire shares and how a later sale might work.
Keep the scheme compliant
Tax treatment at grant, exercise and disposal must be considered separately. A later share sale may qualify for Business Asset Disposal Relief only if the relevant conditions are met.
Agree valuations, maintain records and meet notification and return requirements. Changes in the company or employment relationship can affect the option’s treatment, so review them before an exercise or sale.