Budget briefing | Tax |

Budget 2021: EMI call for evidence

Overview

In line with the Budget aim of seeking to support innovative, fast-growing firms, the Treasury have released a call for evidence in connection with the Enterprise Management Incentive (EMI) options regime. First introduced in 2000, EMI options are a share incentive arrangement widely used by start-ups and other growth companies, in particular in the tech related industries. EMI options can give generous tax advantages for both employees and employers provided implemented correctly. For more information about EMI options, please see here.

The good news is that the call for evidence suggests that the government appear willing to extend, rather than curtail, EMI options. EMI options are targeted at SMEs (e.g. amongst other criteria, qualifying companies must have less than £30 million of gross assets and fewer than 250 full-time employees) and although the call for evidence document released by the Treasury does not specify precisely what criteria the government would consider changing, it suggests that it is considering extending the regime to larger companies that are further along in the growth cycle. The government could also consider extending the EMI regime not just to larger companies, but to companies with a controlling corporate shareholder (thereby making it more readily available to companies with private equity or venture capital sponsorship) or to companies that carry out some of the currently prohibited trading activities (e.g. financial services activities such as banking or insurance). As the EMI options regime is no longer subject to EU state aid rules, the government may find that it has more flexibility here.

The Treasury is seeking responses by 26 May 2021 and whatever the outcome of the call for evidence, we expect employee share plans to continue to play an important role as companies move forward from the Covid-19 pandemic, as further discussed in our recent briefing which can be found here.

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