Enterprise Management Incentives (EMI) For London Businesses
Highly experienced, commercial accountancy expertise
One of the most lucrative and fiscally beneficial employee share schemes for owner-managed limited companies is Enterprise Management Incentives (EMI) schemes. Although EMI has been around for over 10 years, a lot of businesses, particularly those in London have not taken advantage of its numerous benefits.
The advantages of EMI for London businesses are manifold. Firstly, they have significant tax benefits for business owners, to encourage them to integrate EMI schemes into their business. Secondly, EMIs are of great value to employees because they feel like they are being rewarded for business success and these rewards can be very lucrative. Finally, an EMI for London businesses, particularly SMEs makes it easier to first attract, and more importantly retain top talent, as they are less likely to be tempted elsewhere.
How does an EMI scheme work for London Businesses?
Enterprise Management Incentives allow selected employees to hold share options within the business. The share options that a single employee can hold cannot exceed the maximum threshold of £250,000. To correctly calculate the value of the EMI, London businesses are recommended to get assistance from an accounting service to correctly value the shares at the point of granting.
EMI schemes are extremely flexible and there is no limit on the number of employees who can participate within the scheme, making it easy to adjust if your workforce expands in size due to business growth. However, London businesses must also be aware that unexercised shared values within an EMI cannot exceed £3 million by law. An employee must also never have control of over 30% of the company’s share capital for the EMI to remain lawful.
Furthermore, for an EMI to remain valid, there is a requirement that all participating members work at least 25 hours per week for their company to qualify for EMI. Alternatively, it can be equal, or above 75% of their working time for the business.
What are the tax benefits for London Businesses using EMI?
One of the biggest bonuses of using an EMI scheme in your business is the huge tax exemptions you can qualify for. Enterprise Management Schemes that are valued correctly at the time of share issue are exempt from both income tax and National Insurance contributions.
If the shares are valued incorrectly, the business is still liable for Income Tax and NI, but they can defer these costs. If any shares are disposed of following the EMI option, they will also need to pay capital gains tax. However, the standard CGT exemption of £10,900 can help to reduce this.
Additionally, Entrepreneurs’ Relief will be available for London businesses, assuming the option was granted one year before the shares were disposed of.
When setting up an EMI for London Businesses, there is no formal process, however, HMRC must be notified within 92 days of the shares being granted and options must be exercised within 10 years of the grant being awarded.
Additionally, please be aware the EMIs are eligible for corporate tax deductions.
How can Wilson Partners help London businesses with EMI schemes?
Wilson Partners are your premier choice for London businesses looking to set up EMI schemes. We can help advise you on the best format for your EMI scheme, explain how the options can be set up to reward your employees and support you when it comes to claiming back the tax and fiscal benefits. We aim to save you as much money as possible, so you and your business employees both reap the rewards.
For more advice on setting up your EMI for London Businesses, contact the Wilson Partners team.
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