EMI Share Schemes
Enterprise Management Incentive (EMI) share schemes are an approved method for UK businesses to incentivise and retain valuable staff. These schemes allow selected employees to acquire shares in the business at a fixed price in the future—often at a discount—while offering significant tax advantages for both the employee and the employer.
Many high-growth companies use EMI options as part of their broader tax planning and reward strategy. Done properly, EMI schemes can reduce employment costs, support staff retention, and increase alignment between company performance and employee interest.
Who Can Use an EMI Share Scheme?
To qualify for an Enterprise Management Incentive, the business must:
- Be a UK trading company or the holding company of a trading group.
- Have gross assets not exceeding £30 million.
- Employ fewer than 250 full-time employees.
- Carry out a qualifying trade under HMRC rules (exclusions apply to sectors like banking, farming, and property development).
Employees must also meet certain eligibility conditions. They must work at least 25 hours per week (or 75% of their working time) for the business and cannot hold more than 30% of the company’s shares.
Tax Benefits of EMI Share Schemes
EMI schemes are structured to minimise tax charges at the point options are granted or exercised. From a tax planning perspective, they offer:
- No Income Tax or National Insurance on grant, or usually on exercise, if options were granted at market value.
- Capital Gains Tax (CGT) applies when shares are sold, rather than Income Tax, and often at a reduced rate.
- Potential eligibility for business asset disposal relief, lowering the CGT rate to 10% on the first £1 million of gains.
- A corporation tax deduction for the employer when the employee exercises the options.
These tax outcomes often outperform traditional cash bonuses or unapproved share option plans, particularly for smaller firms with limited cash reserves.
How EMI Tax Planning Works
Effective EMI tax planning requires careful attention to the conditions set out by HMRC. Common planning areas include:
- Agreeing a share valuation with HMRC before granting options. This helps reduce disputes and locks in a favourable value for tax purposes.
- Structuring option terms to align with business goals—such as retention periods or performance milestones.
- Preparing option agreements and board resolutions correctly.
- Notifying HMRC within 92 days of the grant date using the online system.
We provide end-to-end support on EMI scheme implementation, including working with tax advisers and accountants on the EMI scheme valuation and liaising with HMRC where needed.
EMI Share Schemes vs. Other Share Plans
Compared to other employee share schemes, EMI options are more flexible and offer better tax treatment. However, they must be tailored to the business’s size, structure, and objectives.
We help founders and directors determine whether EMI is the right option or if an alternative—such as growth shares or company share option plans (CSOPs)—might be more appropriate.
Why EMI Share Schemes Are a Strategic Tax Planning Tool
For many businesses, EMI is not just about staff incentives—it is an integral part of long-term tax planning. These schemes:
- Support staff retention without the need for upfront bonuses.
- Protect company cash flow while rewarding performance.
- Provide tax-efficient exits when the company is sold.
- Offer flexibility in how and when options vest and are exercised.
The combined benefit of Income Tax savings, access to Capital Gains Tax reliefs, and a potential corporation tax deduction makes EMI one of the most valuable planning tools available to UK SMEs.
Ready to Put an EMI Scheme in Place?
We can help with the design, documentation, and tax review of your EMI share scheme, including liaising with your accountant or adviser to integrate the plan into your wider tax planning strategy.
Whether you need help understanding EMI tax planning, securing an HMRC-approved EMI scheme valuation, or simply want to explore employee share schemes in more detail—we’re here to assist.
Get in touch today to discuss how an EMI share scheme could support your business goals while offering valuable tax reliefs.
