Enterprise Management Incentive (EMI) share options usually benefit from a very attractive tax treatment in the UK. Provided qualifying conditions are met, no income tax or Insurance Contributions (NIC) arise on the grant to, or exercise of EMI options by employees. When the shares are sold, the gains to the employees are taxed at Capital Gains Tax (CGT) rates of 10%. The company gets a corporation tax deduction for the gains on exercise of the options, therefore the use of employee share based awards such as EMI is linked to increased productivity, so both employer and employee ‘win’.
The Commission was due to grant re-approval for EMI on 6 April 2018. However at a late stage it became apparent that the set 23:00 deadline would not be met.
Options granted in the period from 7 April 2018 until EU State Aid approval is granted are unlikely to be treated as qualifying EMI options.
Tuned to Crowe Clark Whitehill for more information