UK business is “very relieved” – EMI Share Schemes are back on track!
Have you been thinking of granting Enterprise Management Incentives to your key people?
Between 6 April and 16 May the EU approval process for State Aid lapsed and the UK Government was held responsible. Not by design and certainly the EU must be agreeing what a massive positive effect this can have on UK business as the new approval period runs through from 16 May 2018 to 6 April 2023. This “2023” is perhaps a little academic, given that the UK will have left the EU fully before 2022 even allowing for a so called transitional period.
However, the UK will need its own “State Aid” system to enable it to carry out trade deals with EU member states.
But enough of that – the important question now is …
What might an EMI share scheme do for your business?
The tax advantages for an “EMI Scheme” are, to use current vernacular, “pretty awesome”.
If a company share is worth £5 today, your key worker could receive that share, pay no tax on it, then sell it on later when it’s worth perhaps say £25 and make a gain of £20.00. Multiply that up by hundreds or thousands of shares and although they’d pay tax on the gain, the top tax rate would currently be 20%.
It could be just 10% even if the worker pays higher rate tax on their income. The worker could qualify for this even if they hold less than 5% of the shares but their option must have been granted at least 12 months before the sale.
Of course, there are some quite big “hoops to jump through”, several in fact, and they must be done in the right order, but the procedure for getting this scheme up and running is fairly straightforward. Something you can entrust to us.
Some companies will not qualify because of the type of business they are in, for example finance or property related, but many thousands of companies do indeed qualify and a lucky shareholder could be allowed to acquire up to 30% of the shares for up to 10 years after the option to have shares has been granted to them.
The value of scheme shares per worker under option carry a maximum value of £250,000 when options are granted -but include any other share scheme values for that worker when looking at total value.
If you have key personnel and you have an outlook that is “liberal”, an EMI scheme could deliver incentives where a conventional “bonus” arrangement has run out of steam.
An EMI Scheme won’t suit owners who want to retain total ownership of their company but giving new shares doesn’t mean losing control and may be the best way of achieving your goals…
“What if we can’t do an EMI Scheme?”
Are you serious about incentivising your key staff through share ownership?
If “yes”, there is another tax efficient route that we will be happy to discuss with you. Just call us, or send an email through our
contact us page.
