Extended Enterprise Management Incentive valuation period to be wound down
Businesses have been reminded of a change in a share option scheme that enables companies to attract and keep key staff by rewarding them with a share of the business.
The Enterprise Management Incentive (EMI) offers generous tax incentives and can help smaller companies, who might not be able to match salaries paid by bigger firms, keep valued staff.
During the pandemic, HMRC extended the period for which an agreed valuation of shares to be used for EMI options remained valid, assuming no material changes occurred during the meantime, from 90 days to 120 days.
That period will revert to 90 days at the end of the year and from 1 December, agreements issued on or after that date will be valid for 90 days only.
The tax authority has ruled that when agreeing and EMI valuation, it is with the proviso that no changes were made prior to the granting of the options that could affect the accepted value.
According to HMRC, these could include:
- Any change (completed or actively contemplated) in the share or loan capital of the company;
- Any arm’s length transactions (completed or actively contemplated) involving shares of the company;
- Negotiations or preparations for a flotation or takeover;
- Any declaration of a dividend on any class of shares in the company; or
- The publication by the company of any new financial information, for example, the annual accounts or interim results or announcement.
For many start-up firms which need specialist staff, the use of EMI share options is a way to reward key employees and keep them loyal as the business grows.
For help and advice on EMI Schemes and related taxation matters, please call us today.