EU State Aid approval for the Enterprise Management Incentive (EMI) scheme, expired on 6 April 2018.
While the consensus is that it will be reinstated at some stage, businesses can not currently use the EMI scheme to issue share options to employees.
Often used by smaller companies, EMI options are more flexible than most other option plans, allowing selected employees to acquire shares over a prescribed period, whilst also qualifying for favourable tax treatment.
Any EMI share options put in place up to and including 6 April are still valid, as HMRC considers the State Aid approval applies to the process of granting the share options, so the lapse doesn’t affect employees who are already in possession of these share options.
If you are involved in the establishment of EMI schemes and grant of EMI share options, then you need to be aware that there will be a period between the lapse of the existing approval on 6 April and a decision by the EU Commission on a fresh approval. The government assures it is working hard to ensure this period is as short as possible.
Meanwhile, EMI share options granted in the period from 7 April 2018 until the date new EU State Aid approval is received may not be eligible for the tax advantages presently afforded to option holders. Accordingly share options granted in that period as EMI share options may end up being treated as non-tax advantaged employment-related securities options.
If you are considering issuing employee share options, you might want to talk to Craig Tolliday at Rawlinsons about whether you should delay or consider other incentive programmes while EMI share options await EU State Approval.