Changes to the process to grant options under an EMI scheme were announced by the government in the Spring Budget.
From 6 April 2023, there will no longer be a requirement to include the details of share restrictions in the body of the EMI option agreement and it will no longer be necessary for the employee to sign a working time declaration though, crucially, employees will still have to comply with working time requirements for their share options to be and remain a qualifying EMI option. This simplified process of granting EMI options will be welcomed by companies, as failure to comply with these previous requirements were not uncommon and no doubt increased professional costs and potential tax liabilities for companies trying to resolve these technical breaches prior to exits.
In addition, from 6 April 2024, the deadline for companies to submit an EMI notification to HMRC of the grant of an EMI option will be extended from 92 days following the date of grant to 6 July following the end of the tax year in which the grant occurs. This brings the deadline in line with when companies have to file their EMI annual returns and will hopefully streamline the reporting process and decrease the number of companies missing such deadline.
We have experienced potentially serious tax issues for the company as well as the employee previously when the above requirements were in force. In one case, we had to seek advice from tax counsel specialising in share option schemes who, in that case, persuaded the share schemes policy team at HMRC that the requirement should not be enforced.
Please do get in touch if you are considering implementing an EMI share scheme or have any concerns regarding an existing scheme.
