Enterprise Management Incentives (EMI) For Reading Businesses
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Reading has a large number of owner-managed limited companies. All of these businesses could benefit from enterprise management schemes (EMIs). EMIs are one of the most attractive share schemes for a business. It encourages retaining highly skilled and valuable employees, whilst also providing you with significant taxation advantages.
Over the last 10 years, EMI for Reading businesses has been increasingly popular for these reasons. Even nowadays, the Government is still pushing for EMI schemes to be adopted by more and more workforces.
How does an EMI for Reading Businesses work?
Enterprise management incentives (EMIs) allow employees to hold options over shares within their company, up to the total value of £250,000 at any one time. An independent assessment of a business is required in order to properly calculate the value of the given shares.
EMIs are popular for Reading businesses, particularly larger SMEs because there is not a limit on the number of employees who can be part of the EMI. However, unexercised share values can never exceed £3 million and additional requirements must be met.
Firstly, employees cannot have control over more than 30% of the company’s share capital. Finally, employees joining EMI in Reading businesses must work a minimum of 25 hours for their company, or 75% of their ‘working time’ if this is below the figure.
What are the tax benefits of an EMI for Reading businesses?
EMIs are an ideal choice for business owners as it comes with several tax benefits. The grant itself is exempt from income tax and National Insurance contributions, provided that the EMI has been valued correctly. Options need to be exercised within 10 years and companies have to ensure they and their employees do not get disqualified.
If values are correct, Income Tax and NI will be required to be paid, although they can be deferred. Capital gains tax may also be a liability if businesses do dispose of shares following the EMI option. The standard Capital Gains Tax annual exemption of £10,900 is still available to reduce this CGT requirement.
Business disposal asset relief – formerly known as Entrepreneurs’ Relief – will be available assuming the option was granted at least a single year before the disposal of the shares.
When applying for EMI for Reading businesses, there is no formally prescribed process. However, HMRC must be informed of all grants in writing within 92 days of them being issued to check share valuations are appropriate. Finally, EMI options must be exercised within 10 years of the grant being issued.
How can Wilson Partners help set up EMI for Reading Businesses
Wilson Partners are an experienced accountancy and tax advisory service in the Thames Valley. We have worked with a number of Reading businesses to help set up EMI schemes to ensure they benefit you and your employees the most. We can help you select the best format for a share scheme, explain how best to reward employees and most importantly, identify all the tax benefits which you can claim to help you save money.
For advice on setting up an EMI for Reading businesses, please contact Wilson Partners.
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