EMI Options – Update

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Last week HMRC unexpectedly announced (with just two days’ notice) that the government’s current State Aid approval governing the operation of EMI option schemes would expire on 7 April.

This means that the tax status of any EMI options which are granted on or after 7 April is not known. 

The HMRC bulletin suggests (although doesn’t confirm) that EMI options granted on or before 6 April should not be adversely affected, but that any EMI options granted on or after 7 April could potentially be treated as unapproved options and subject to income tax / NICs on exercise.

The government is working with the EU Commission to renew the approval, however it is not clear how long this process may take or whether any such approval will retrospectively cover the period from 7 April.

Therefore specific advice should be taken in respect of any EMI options being granted before the updated State Aid approval is secured.  It may be necessary to consider delaying option grant dates, incorporating additional conditionality provisions, or looking at alternative schemes such as CSOPs (which are not subject to the same state aid agreement) in order to protect the employee’s and the employing company’s tax positions.

If you would like any further information, please contact Nicola Parkinson in Walker Morris’ tax team.