The premier source of transactional advice in the south east
Banner 1

The EMI scheme just got even better

no image

Last summer witnessed an improvement in the Enterprise Management Incentive (EMI) share scheme – already the most generous of the tax advantaged share schemes.  Specifically, the 5% threshold for Entrepreneurs’ Relief (ER) was abolished where the shares concerned had been acquired under an EMI scheme writes Margaret Connolly, Partner and Head of Taxation at Reeves.

This was a positive development which we welcomed at the time.  However, under this reform it was still necessary for the shareholder to have held the shares for a minimum of 12 months to secure ER and the 10% effective rate of Capital Gains Tax (CGT) that it brings in train.

In practice, this meant that the majority of EMI option holders would remain unable to qualify for ER, since a typical scheme is structured such that the options are exercised immediately prior to a sale of the company.  It follows that the shares are likely to have been held for a period closer to 12 hours than 12 months.

The challenge then, was to make the EMI scheme even better.  Margaret has been heavily involved in making representations to HM Revenue & Customs (HMRC) in this respect.

These efforts have now been crowned with success.  In his recent Autumn Statement, the Chancellor announced that for most EMI shares disposed of on or after 6 April 2013, the 12 month holding period will run from the date that the options are granted.  This will make a major difference to EMI option holders, the vast majority of whom should now secure ER on the sale of their shares.

We are aware that some advisers are talking about delaying impending company sales to take advantage of the new rules.  In our view, this is a risky strategy that could cost you your buyer.  This note of caution aside, we are pleased to observe that a consultation process can work, and Margaret is now taking requests for other tax rules that you would like to see changed!

For further information, please contact Margaret Connolly on 01227 768231 or by emailing