Temporary Suspension of Enterprise Management Incentive Tax Benefits from 6 April 2018

Yesterday, HMRC made a statement on the Enterprise Management Incentive (EMI) scheme and State Aid approval. Please see the full text below and some short context from FTI Consulting, a member of the BIA Finance and Tax Advisory Committee (FTAC). Members are advised to consult their internal accountants or tax advisers for further guidance on this issue.

 

"EU State Aid approval for the EMI scheme expires on 6 April 2018. The government has, since last year, been following the process of applying to the European Commission for fresh approval and we await the Commission’s final response. We won’t receive this before 6 April 2018 and so those involved in the establishment of EMI schemes and grant of EMI share options need to be aware that there will be a period between the lapse of the existing approval on 6 April and a decision by the EU Commission on a fresh approval. The government is working hard to ensure this period is as short as possible.

HMRC considers that the State Aid approval applies to the granting of share options and therefore that share options granted up to and including 6 April 2018 won’t be affected by this lapse of the approval.

EMI share options granted in the period from 7 April 2018 until EU State Aid approval is received may not be eligible for the tax advantages presently afforded to option holders, and accordingly share options granted in that period as EMI share options may necessarily fail to be treated as non-tax advantaged employment-related securities options.

Companies may wish to consider delaying the grant of employee share options intended to qualify as EMI share options until fresh EU State Aid approval has been given.

HMRC will continue to apply its current guidance and practice, in relation to employment-related securities options validly granted as EMI share options before 6 April.

A further update will be provided in due course."

 

Note from FTI Consulting:

Companies looking to make awards should look to do so today (5 April) or defer this until the position has been confirmed.  

If there is a pressing need to make awards in this interval, advice should be taken to ensure that it is possible to cancel and re-grant the options.

 

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