Enterprise Management Incentives (EMIs)
Here’s everything you need to know about EMIs
Enterprise Management Incentives (EMIs) are a type of employee share option scheme that offers tax advantages to help small and medium-sized enterprises (SMEs) attract and retain key employees by granting them the opportunity to acquire shares in the company. EMIs were introduced by the UK government to provide companies with a flexible and tax-efficient way to reward and incentivise employees.
Tax Advantages
EMIs offer tax advantages for both the company and the employees participating in the scheme.
Employees generally do not have to pay income tax or National Insurance Contributions (NICs) on the grant or exercise of the EMI options (subject to certain conditions). When employees sell the shares acquired through the EMI scheme, they may qualify for capital gains tax (CGT) reliefs, potentially resulting in a lower tax liability.
Eligibility
EMIs are available to certain qualifying companies, the company must be independent and meet specific criteria related to size, trading activities, and not being controlled by another company. Our advisors can help you determine your eligibility and how to apply.
Employee Participation
Eligible employees, including directors and full-time employees, can be granted EMI options to purchase shares in the company. EMI options are usually granted at a predetermined exercise price, which is the price employees would pay to acquire the shares at a later date.
Exercise Price and Exercise Period
The exercise price of the EMI options is determined at the time of grant and is typically the market value of the shares at that time. Employees have a specified exercise period during which they can purchase the shares at the exercise price.
There are specific conditions and limits associated with EMIs, including the maximum value of shares that can be subject to EMI options for each employee. Consulting with a tax professional with expertise in EMI schemes can ensure that the EMI scheme is structured and managed in a tax-efficient and compliant manner, ultimately benefiting both the company and its employees.
Why implement an EMI scheme?
Employee Retention and Motivation
An EMI scheme allows a company to retain and motivate valuable employees by offering them an opportunity to own a stake in the company. This sense of ownership often boosts employee engagement and commitment to the company's success.
Alignment of Interests
EMIs align the interests of employees with those of the company and its shareholders. When employees hold shares in the company, they have a vested interest in its growth and profitability, fostering a stronger sense of teamwork and dedication.
Attracting Top Talent
Offering potential employees the opportunity to participate in an EMI scheme can be an attractive incentive, attracting high-calibre individuals to join the company. The prospect of future financial gain through share ownership can be a compelling factor for prospective employees.
Tax Advantages
EMIs offer tax benefits for both the company and employees, making it an attractive incentive. Tax-efficient schemes can enhance the appeal of EMIs to both the company and its employees.
Interested in our EMI valuation? We’re here to help!
Talk to us
Schedule a free consultation to optimise tax efficiency for your Startup
