News added on 18.05.2018

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EMI

The European Commission finally approves prolongation of EMI schemes

The European Commission has approved the prolongation of the enterprise management incentive (EMI) scheme under EU state aid rules. The previous approval lapsed on 6 April 2018. What’s the impact?

What are the tax advantages associated with EMI share schemes? The tax savings are significant for both employers and their employees. EMI share option holders can potentially exercise their options without paying income tax and NI (however if the shares are held long enough to generate a gain, there could be capital gains tax to pay at the point of sale). Companies can also enjoy a corporation tax deduction on the gain at the date of exercise. The aim of the scheme is to allow SMEs to recruit and retain employees, enabling their growth, without unduly distorting competition in the Single Market.

What did the EU Commission consider? The Commission’s assessment found that the prolongation of the scheme is necessary to enable UK SMEs to retain and attract talented and skilled personnel. It also found that the measure contains several safeguards to limit the potential distortion to competition, such as a cap on the value of the share options that can be subject to a tax advantage for both the employer and its employees.  It was therefore decided that the measure is in line with EU state aid rules.

Are options granted between 7 April and 15 May 2018 affected? The Commission initially authorised the scheme in 2009 but the approval lapsed on 6 April 2018. There was some speculation as to the tax treatment of options granted whilst fresh approval was sought. However the case registered on the Commission’s website does not display a start date for the duration of the state aid, suggesting that the approval will continue from the end of the last period.

What happens after Brexit? The decision only applies until the UK ceases to be a member state, subject to any withdrawal agreement.

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