Enterprise Management Incentives (EMI) is a powerful tool for Small to Medium-sized Enterprises (SMEs) in the UK. This government-backed employee share option scheme allows you to grant your employees the right to acquire shares at a future date, providing a highly tax-efficient way to reward and retain your top talent, including full-time directors.

With the flexibility to grant EMI options over Growth Shares, this scheme is perfect for SMEs looking to share equity with their employees. But, to qualify, your company must meet specific criteria, including having gross assets of £30 million or less, not granting share options of a value higher than £250,000 per employee in a 3-year period, having no more than 250 employees, and can’t be granted to subsidiaries and specific activities, including property development, legal or financial services.

The benefits of EMI options are clear:

• Best Tax-Efficient Employee Share Scheme: EMI qualifies for Business Assets Disposal Relief (BADR), reducing Capital Gains Tax (CGT) to a 18% flat rate rather than CGT at 24% or PAYE/NI up to 60%.
• Corporation Tax Relief: The company can claim relief on the financial gain of the employee when the employee sells the shares back to the company.
• Select Key Staff: You can select only key staff and set conditions for each recipient, including performance and length of service milestones.

However, there are some limitations to keep in mind:

• Strict Eligibility Criteria: Your company must meet the qualification criteria to be eligible for the scheme.
• Pre-Company Valuation Agreement: You must agree on a valuation with HMRC before setting up the scheme.
• Ongoing Administration: The scheme can be complex to set up and requires ongoing administration.

Invest in your team and unlock their potential with EMI options.

Growth Shares offer a powerful incentive for businesses where an EMI scheme isn’t an option. With this scheme, your company can issue a special class of shares to a wide range of recipients, including investors, non-employees, employees, and full-time directors.

Growth Shares don’t give recipients a stake in the company’s pre-existing value. Instead, they allow recipients to share in the company’s future growth while protecting the accumulated value for existing shareholders.

When issued, Growth Shares are valued at the ‘hurdle rate’, meaning their initial value is zero. As the company grows, the value of the shares increases, providing a tangible reward for the recipient’s contributions.

Why Choose Growth Shares?

• Available to all industries and companies, with no restrictions like the EMI option.
• Can include a large pool of recipients, including investors and non-employees.
• Offers tax advantages, with no income tax due when the shares are received and only Capital Gains Tax (CGT) due on any gains when sold.
• Allows for customised conditions for each recipient, including performance and length of service milestones.

Things to Consider

• Can be complex to set up and administer and may incur additional costs.
• Requires ongoing valuations.
• HMRC may dispute your valuation, leading to potential tax implications.

With Growth Shares, you can unlock the potential of your business and provide a powerful incentive for growth.

Unapproved options are share options that fall outside the requirements of HMRC-approved share option schemes. While they don’t offer the same tax advantages as approved schemes, they provide a valuable option for non-UK-based staff, making them the perfect choice for international teams.

Why Choose Unapproved Options?

• Pay Capital Gains Tax on the gain from the sale of shares.
• Corporation Tax relief for the company on the financial gain of the employee when the employee sells the shares back to the company.
• Ideal for non-UK-based staff, with the ability to set customised conditions for each recipient, including performance and length of service milestones.

   

Things to Consider

• Income tax is due on shares generated through exercising the option.
• Can be complex to set up and administer, with potential for higher administrative and legal costs.

With Unapproved Options, you can empower your international team and provide a flexible incentive for growth.