Enterprise Management Incentive Scheme

The Enterprise Management Incentive (EMI) share option scheme is a fantastic way to reward and motivate your employees.

The Government backed EMI scheme provides fantastic tax advantages to employees as it provides a tax beneficial structure for employees. A share option agreement gives an employee the right to purchase a company’s shares in the future (at a price fixed today). A profit could be made by the shareholder if the value of the business increases over time. This can be a key incentive for employees.

Many entrepreneurial businesses will use the EMI scheme to recruit a talented team. More established businesses may introduce an EMI scheme in order to retain and motivate their existing team. Apart from some small set-up costs, there are no cash costs associated with share options, so they are very cost-effective.

Employees do not have to pay the income tax usually due on the market value of any shares or options granted to them. Under an approved EMI, employees are only charged capital gains tax at 10% on the increase in value over what they pay for the shares. As long as that price is at or above the market valuation of the shares on the date of grating the options. This value is agreed upfront with HMRC as part of the process (see below for further information).

We have pulled together this handy brochure which explains all of the benefits, structure and how the scheme will actually work. You can download a copy below.