I talk a lot about incentivising employees via a grant of shares, usually through the tax-advantaged EMI scheme. Unfortunately, there has been some bad news in the last week or so (and yes, I know I'm a little late to the table on this one, but I've been away on holiday).
According to the latest HMRC employment-related securities bulletin - which can be found here - the EU State Aid approval for the EMI scheme, expired on 6 April 2018.
Before you clasp your head in your hands in dismay, HMRC considers that the State Aid approval applies to the granting of share options and therefore that share options granted up to and including 6 April 2018 won’t be affected by this lapse of the approval.
Good news for all of you with existing schemes and options in place.
Unfortunately, EMI share options granted in the period from 7 April 2018 until EU State Aid approval is received might not be eligible for the tax advantages afforded to pre 6 April 2018 option holders, and accordingly share options granted in that period as EMI share options may fall to be treated as non-tax advantaged employment-related securities options.
However, let us take some solace in the fact that the government has, since last year, been following the process of applying to the European Commission for fresh approval and currently await the Commission’s final response. We are assured that the government is working hard to ensure this period is as short as possible.
As a result, companies may wish to consider delaying the grant of employee share options intended to qualify as EMI share options until fresh EU State Aid approval has been given. This advice would apply even to existing schemes where new options are being granted.
If you want further advice on this please contact me at Haines Watts.
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