Changes to EMI rules announced

Date: 14/01/13

Changes to EMI rules announced

Small businesses need to be aware of changes to employee share scheme rules which may help them retain key staff.

The changes to the Enterprise Management Incentive (EMI) share option scheme are outlined in the newly published draft Finance Bill.  Under these changes, staff may qualify for Capital Gains Tax at a lower rate of 10%, rather than 28%, on the sale of their shares after one year from the date on which the options were granted.

The move is designed to remove potential cash flow problems and valuation risk previously associated with capital gains Entrepreneurs’ Relief for EMI option shares.  Staff will be able to exercise their share options and then sell their shares on the same day, rather than having to buy out the options at least a year before they cash them in if they want to claim the reduced capital gains tax rate.

The 5% ownership threshold to qualify for the capital gains tax relief will also be removed, as the Government looks to encourage wider employee ownership and to help entrepreneurial businesses.

The new arrangement will take effect for shares sold on or after 6 April 2013, if the shares were acquired by exercise of an EMI option after 6 April 2012.

The Government wants more people to have the opportunity to have a stake in their employer company and these changes are designed to make doing so more attractive.  In the long term, this could help smaller business retain key members of staff.

Of course, an EMI scheme is not right for every business.  Employers considering offering employee share incentives should seek professional advice first, to ensure they adopt the most appropriate plan for their requirements.

For further information please contact Stuart Hinnigan at the office.

Stuart Hinnigan FCA CTA

Author: Stuart Hinnigan FCA CTA

Stuart’s career in accountancy began when he joined Preston based Moore and Smalley in 1994 following his graduation from Lancaster University. He qualified as a Chartered Accountant in 1997 and then chose to specialise in...

Read More

Share this article:

0 Comment

Nobody has commented yet. Why not add one?

Add your Comment

We have the ability to edit and/or delete posts and comments. Links should be relevant to the topics. Please note all comments are subject to review before inclusion.

Register to comment

Memberships & Accreditations

When appointing a firm of accountants it is important to check that they are appropriately registered and regulated.

Our clients can be assured that Scott & Wilkinson are registered with the Institute of Chartered Accountants in England and Wales to carry out audit work in the United Kingdom and regulated for a range of investment business activities.

We are also registered with the Chartered Institute of Taxation as a firm of Chartered Tax advisors. 

Any use of the term "partner", if used, indicates a member of Scott & Wilkinson LLP or an employee of Scott & Wilkinson LLP with equivalent standing and does not indicate that a partnership exists for the purposes of the Partnership Act 1980.