This website uses cookies, by continuing to browse the site you are agreeing to our use of cookies. View our privacy policy.

An Enterprise Management Incentive scheme (EMI) is a recognised HMRC initiative specifically intended to help companies to recruit and retain employees by rewarding them with the option to acquire equity shares.

The ethos of the EMI scheme is to reward employees who work within owner managed businesses by giving them a sense of ownership over the company and affording them the possibility of sharing in the business’ success, usually on a sale or flotation of the company.

Options can be granted to anyone in the company providing HMRC limits are adhered to and that no one member of staff (together with their close relations) holds options over more than 30% of the company’s shares.

Reward key employees

As EMI rules apply to companies with between one and 250 employees, it is an ideal scheme for owner managed businesses to help incentivise key staff and provide them with a tax advantageous benefit.

The scheme also has a built in safety net whereby the employee’s options may only be converted into actual shares at specified trigger points. Working with the business owner, Warrener Stewart will help decide what these key trigger points are for each business; while for many businesses it could be on the sale or flotation of the company, for others it could be meeting particular business targets or even if the employee has stayed with the company for a predetermined number of years.

Should an employee leave the company their options lapse. If any shares are issued along the way, we can help build in safeguards to ensure they are cancelled should an employee leave the company. Plus there are overriding limits from time to time which restrict the total value of options that company is allowed to allocate.

Another benefit of the EMI scheme is that business owners can pre-determine just how many share options they want to issue and who they want to invite onto the scheme. Eligible employees need to work for at least 25 hours a week for the company before they are allowed to take part in the scheme.

Setting up an EMI scheme

As chartered accountants, Warrener Stewart can arrange the entire EMI scheme (other than the legal documentation) on your behalf. The first step is to organise a business valuation, then agree the terms of your scheme with HMRC and gain their approval for the scheme. Once this has been done, a firm of lawyers will be needed to draft the agreements. When an employee wants to exercise their options a formal exercise notice is served on the company so that the shares can be issued and appropriate returns are made to HMRC.

The grant of the option to employees is tax-free, also when it is exercised employees are not liable for tax or National Insurance. This makes it a perfect scheme to give employees an incentive to help grow the company and engender in them a genuine feeling of business participation and ownership.

There is a further tax saving for the company once the options are exercised, because it will be entitled to tax relief on any uplift in value on the shares between the time of the grant of the option and the date on which it is exercised.

Most owner-managed companies will qualify for EMI, although there are some exceptions.

If you would like to find out more about implementing your own EMI Scheme and find out if your company qualifies, speak to Colin Edney on 020 7731 6163.

Phone Icon

If you have any questions about how your business could benefit contact us today:

London 020 7731 6163 Edinburgh 0131 378 7589

Enter security code:
Security code

“For the past 20 years Warrener Stewart has consistently given good advice... going above and beyond their remit.”
Theo Brehony - London Preparatory School Limited