Forget the cake and candles – celebrate the EMI scheme’s tenth birthday next year by ensuring you secure its favourable tax benefits.
Enterprise Management Incentive (EMI) schemes are flexible unapproved share schemes, considered to be the most tax-efficient share scheme in practice.
One of the main characteristics of the tax-favoured treatment is that it is only available in respect of options which are exercised within ten years of the date on which they are granted (or within ten years of the date the original option was granted in the case of replacement options).
As the EMI scheme was introduced in 2000 it is possible that there are unexercised EMI options still in existence that will soon reach their tenth year.
Despite recent plummeting share prices it is still entirely possible that some of those options may be worthwhile (i.e. that the strike price is less than the current share value). So it is worth remembering that exercise must take place before the crucial ten-year anniversary if the hoped-for tax benefits are to be secured.
Note that it is not a requirement of EMI that an option must lapse after ten years: it is simply that any exercise after the ten-year anniversary will not benefit from the reliefs as later exercise is treated under the generally less favourable, non-approved rules.
If you need more help on EMI options contact Mike Dawes of TWP Accounting at M.Dawes@twpaccounting.co.uk or phone 01932 704 700.