EMI - Disqualifying events

Question 1

What are the tax consequences of a disqualifying event?

Will the gain before the DQ event retain its tax-exempt status?

What will happen to Entrepreneur’s Relief?

Answer 1

If the option is not exercised within 90 days, the part of the option gain on exercise that arose after the disqualifying event (MV at exercise less MV just before DQ event), will be subject to income tax and NICS (like a non tax-advantaged option)

The gain before the DQ event will retain its tax-exempt status.

If the option is exercised more than 90 days after a DQ event, this will be lost.

Question 2

Do options that have been subject to a disqualifying event still count towards the £3 million limit total, and toward the individual limits?

Answer 2

Yes.

No statutory reference in PLC note

Question 3

If there is a disqualifying event, and exercise cannot be made within 90 days without being within 1 year from grant (before 6 April 2019 - two years after from grant after this date), then what will happen to Entrepreneur’s Relief?

Answer 3

Entrepreneur’s Relief will be lost.

Question 4

Which section of ITEPA deals with the modified tax consequences following disqualifying events?

Answer 4

Section 532 ITEPA.

Question 5

Which section of ITEPA sets out the disqualifying events?

Answer 5

Section 533 ITEPA.