Chartered Accountants
What Makes An Employee Eligible For EMI?
In our previous article, we discussed the key qualifying conditions for a company to be eligible to implement an Enterprise Management Incentive (EMI) Scheme, but what is required of the employee?
As both parties need to meet the strict qualifying conditions in order for HMRC to approve the tax relief, it is important to be aware of some of these conditions and to ensure they are met to avoid unwanted tax bills.
For an employee to be eligible, they must work for the relevant company, or group, for at least an average of 25 hours per week or, if less, 75% of the employee’s working time. When calculating whether an employee meets the 75% requirement, you should take into account their total working time including all remunerative work. This includes employment and any self-employment, for example, as a consultant.
In addition to this, employees cannot be granted EMI options if they, together with their associates, own more than 30% of the shares in their employer company.
Provided employees meet the above conditions, they can be granted EMI options by their employer and can enjoy the generous tax reliefs available under the EMI Scheme.
EMI shares are a great way to incentivise and remunerate eligible employees because, typically, no Income Tax or National Insurance is payable by the employee, provided they purchase the shares at their market value at the date they were granted. However, if the shares are granted at a discount, Income Tax will be due on the discounted element. National insurance may also be due if the shares are readily convertible assets
For more information or advice on Enterprise Management Incentive Schemes, please contact our Employer Solution team.
In our next article, we will provide a case study example of a company we assisted with implementing an EMI Scheme.
