Businesses can continue to grant share options through the Enterprise Management Incentive (EMI) scheme, safe in the knowledge that current tax advantages still apply, according to share incentives specialists at accountancy firm, Menzies LLP.
The European Commission confirmed earlier this week that the EU State Aid approval, which is required to operate EMI schemes in the UK, has now been secured. This approval had expired on 6th April 2018 and since then businesses seeking to grant share options through an existing or new EMI scheme have been advised to hold fire.
Georgina Holloway, tax manager and share incentives specialist at accountancy firm, Menzies LLP, said “This will be a relief for many small and growing businesses that value their EMI schemes and want to continue to use them to attract and retain key employees.
“While we expected HMRC’s application under the EU State Aid rules to be successful, it is unfortunate that small and growing businesses have been kept waiting for clarification. Without state aid approval in place, many did not feel confident granting new share options until they could be certain that current tax advantages would apply.
“This development restores certainty and means employers can continue to use EMI schemes to motivate and retain their staff.”
EU state aid approval for EMI schemes operating in the UK is only expected to run until Britain leaves the EU, or at the end of any transition period. At that point, the UK Government could review the existing EMI scheme and potentially consider extending it further. Georgina Holloway explains:
“Brexit will bring more uncertainty, but the UK Government is likely to look favourably on employee incentive schemes such as EMI, which have been popular with employers and employees alike.
“It is even possible that HMRC could relax current criteria after Brexit. For example, the scheme could be extended to larger companies, with 250 employees or more, or individuals could be allowed to hold share options with a larger value, above the current cap of £250,000.
“Without a requirement to secure EU State Aid approval, share incentive schemes could be re-designed or amended to meet the needs of employers and to help them in tackling skills shortages within their industries.”