Chapter 34: Enterprise Management Incentives (EMIs)

Question 1

Non-Tax Advantaged Share Option Schemes

When is There a Tax Charge Under a NTAS Option?

Answer 1

Exercise of The Option.

Always.

Question 2

Non-Tax Advantaged Share Option Schemes

How is a Tax Charge Calculated Under an NTAS Option?

Answer 2

MV at Exercise
Less: Amount Paid for Shares

‘Employment Income’

Subject to NICs if Readily Convertible Assets.

Question 3

EMIs

What Are EMIs?

Answer 3

EMIs Are Incentive Arrangements - Enable Small Trading Companies to Attract & Retain Staff.

CSOPs Target More Larger Companies.

Question 4

EMIs

When Must HMRC be Notified With Details of The Option Agreement?

Answer 4

Within 92 Days.

The Scheme Must be Registered With HMRC Before Notification Can Take Place.

Question 5

EMIs

What is The Deadline For Notification From 6 April 2024?

Answer 5

6 July Following The Tax Year End.

Question 6

EMIs

How Does The EMI Share Option Operate?

Answer 6

The Share Option Gives Employees Rights to Buy Shares:
* Within a Specified Period; and
* At a Fixed Price.

Also Known as The Date of ‘Grant’.

Question 7

EMIs

Is There a Tax Implication on Grant?

Answer 7

None.

There is Never a Tax Charge on Grant of an EMI Option.

Question 8

EMIs

How is an Option Treated When Exercised > 10yrs From Grant?

Answer 8

Treated as a Non-Tax Advantaged Option.

Question 9

EMIs

When Does a Tax Charge Arise on Exercise?

Answer 9

When a Discount is Offered at The Date of Grant.

Taxed as Employment Income.

Question 10

EMIs

How is The Tax Charge on Exercise Calculated?

Answer 10

Lower of:
* MV of Shares at Grant; or
* MV of Shares at Exercise

Less: Option Price

‘Employment Income’

Question 11

EMIs

How is a Capital Gain Calculated on Sale of The Shares?

Answer 11

Sales Proceeds
Less: Amount Paid for Shares
Less: Amount Charged to Income Tax

Capital Gain

(Similiar Calculation For NTAS Option Schemes)

In All Instances.

Question 12

EMIs - Qualifying Conditions

To Grant EMI Options, The Company Must:

Answer 12

Be a Small Trading Company.
* Assets < £30 Million
* Full-Time Equivalent Employees < 250

Have a Permanent Establishment in The UK.

Question 13

EMIs - Qualifying Conditions

What is The Maximum Value of Shares Any Given Employee Holds?

Answer 13

£250,000.

(Value of Shares at Grant)

Pooled Together With Shares Held Under CSOPs.

Question 14

EMIs - Qualifying Conditions

Prohibited Trades Include:

Answer 14

• Financial Activities
• Legal Services
• Farming
• Property Development
• Ship Building

Question 15

EMIs - Qualifying Conditions

What is The Working Time Condition?

Answer 15

An Employee Must Devote:
* 25 Hours a Week; or
* 75% of Their Total Working Time to The Company

Question 16

EMIs - Qualifying Conditions

What Relief Can be Claimed in Respect to The Disposal of EMI Shares?

Answer 16

BADR.

The Shares Must be Held for > 2yrs Since Grant to Claim.