Chapter 34 - Enterprise Manager Incentives

Question 1

EMI’s can be used to give options to selected employees for shares up to what amount?

Answer 1

£250,000

Question 2

What criteria must a company meet to grant EMI options?

Answer 2

• Small trading company
• Assets not worth more than £30mil
• Fewer than 250 full-time equivalent employees

Question 3

Those with more than what amount of shares cannot participate in EMIs?

Answer 3

30%

Question 4

In order to qualify for favourable tax treatment, within how many years must the option be exercised?

Answer 4

10

Question 5

True or false

Income tax is charged on the grant of the option

Answer 5

False

The grant of option is never subject to any tax charge

Question 6

In what circumstance would a tax charge apply?

Answer 6

Where the option was granted at a discount

Question 7

How do you calculate income tax on exercise?

Answer 7

the lower of -
(i) Market value of shares at grant
(ii) Market value of shares at exercise
LESS: option price

Question 8

In what circumstance will NICs apply?

Answer 8

When the shares are readily convertible assets

Question 9

There will be a capital gain on the sale of shares. How is this calculated?

Answer 9

Sales proceeds
LESS: amount paid for shares
LESS: amount charged to income tax