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The European Commission Approves EMI Schemes Under State Aid Rules

Written by Jon Cooper

Last week, the European Commission approved “the prolongation of the UK Enterprise Management Initiative (EMI) scheme ” under EU State Aid rules.

In their news update, the European Commission stated that the UK authorities notified their plans to extend the scheme in March 2018.  It seems extraordinary that this notification was left so close to the lapsing of the original approval.

The Commission’s assessment found that EMI was “necessary to help UK SMEs attract and retain talented and skilled personnel.”

Broadly, a company with assets of £30 million or less, unless categorised in an excluded activity, can offer an EMI scheme to key staff and grant share options up to the value of £250,000 in a three-year period.

These share options would not be subject to Income Tax or National Insurance so long as the employee buys the shares for at least the market value they had at the point when the option was granted.  If the employee subsequently sells the shares at a profit, Capital Gains would be payable.

The HMRC originally stated that “EMI share options granted in the period from 7th April 2018 until EU State Aid approval is received may not be eligible for the tax advantages presently afforded to option.”

However, the case summary published on the EU’s State Aid Register only indicates that the ruling would expire on 6th April 2023.  In reality, the ruling is likely to expire when the UK ceases to be a Member State of the EU.

The expectation is that the European Union (Withdrawal) Bill will include legislation to cover enshrining EMI schemes into UK law unless the UK decides to join the European Economic Area, in which case State Aid Rules will still apply.

As no start date was specified, the inference is that there should be no interruption of state aid approval for EMI scheme.

However, as yet, HMRC has not published a bulletin to confirm the details going forward.  We will issue a news alert when this happens.

In the meantime, if you would like further information on the Enterprise Management Incentive or other share schemes, please email us at tax@cooperfaure.co.uk.

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