PT43 EMIs Flashcards
Enterprise Management Incentives (EMIs) are another type of share option eligible for favourable tax treatment.
EMIs can be used to ….
give options to selected employees over shares worth up to £250,000
The maximum value of shares in a company over which EMI options can be granted is …
£3 million.
To grant EMI options, the company must be….
a small trading company with assets of not more than £30 million and fewer than 250 full-time equivalent employees.
No prohibited trades
EMI Schemes:
Limitations on which employees can participate?
There is no limit on the number of employees who can participate, but those with more than 30% of the shares cannot participate.
EMI Schemes
In order to qualify for favourable tax treatment…..
the option must be exercised within ten years of grant.
EMI Schemes:
There is only a tax charge on the exercise of an option within ten years if….
if the option was granted at a discount, and it is the discount which is taxed.
EMI Schemes:
Income tax on exercise (only if discount at grant) is on what value?
Lower of:
(i) Market value of shares at grant
OR
(ii) Market value of shares at exercise
Less: Option price (X)
‘Employment income’ X
EMI Schemes: There will be a capital gain on the sale of the shares.
The CGT base cost is …..
the amount paid for the shares plus any amount charged to income tax on exercise
Where a ‘disqualifying event’ takes place between grant and exercise….
If the option is not exercised within ____ days of a ‘disqualifying event’….
the option can still be exercised but the exercise may give rise to a tax charge.
90 days
the increase in value of the shares between the ‘disqualifying event’ and the exercise is charged to tax
‘Disqualifying events’ ….
include the company no longer carrying on a qualifying trade or the employee no longer being eligible because they are no longer an employee or no longer work the required number of hours.
