In today’s market recruiting and retaining key employees in certain industries can be seriously tough. An under utilised way of doing this is for small companies to offer EMI (Enterprise Management Incentiveshare) options to those employees they really don’t want to lose.

It allows the employee in certain qualifying companies to receive an option to buy shares in the company in the future subject to specific conditions having been satisfied. The Options can either be triggered on a sale (or exit) of the Company or can be triggered when certain milestones are attained. Certainly by including performance milestones the employees are incentivised to achieve those results.

There are tax advantages for both the Company (‘Employer’) and the employee in granting share options. The Employer will get Corporation tax relief in respect of the options once they are allotted. The employee will also benefit as long as the exercise price equals the market value of the shares at the grant date then the Employee will not pay income tax at the date of exercise. The option must be exercised within 10 years of the date of grant.

The employee can also benefit from Entrepreneurs Relief on disposal of ‘exit only’ Options as long as they have held the Option for over 12 months and are still employed by the Company at the date of sale. (Entrepreneurs Relief has the effect of reducing the capital gains tax payable on the first £10milion of qualifying gains to 10%).

The EMI Option usually lapses once the Employee leaves the employment of the Company however there can be exceptions which allow the options to be exercised if they can be exercised within 12 months of departure where the employee’s departure has been caused by death.

To qualify, amongst other things , the Employer needs to have less than 250 full time employees each working over 25 hours a week. If you do fit the qualifying criteria, EMI Options allow you to incentivise staff to work harder and encourage them to stay with you.

We can work with the Employer and their accountants or tax advisers to produce the documents needed to implement the EMI Options. Please contact Cathy Cook at for more information.

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