The Enterprise Management Incentive (EMI) scheme is a tax-efficient share option plan, available in the UK and used mainly by small to mid-sized UK companies to help attract, retain and incentivise talent.<\/p>\n\n\n\n
If you think this scheme might be the right fit for your business, now is the time to roll up your sleeves. Below we will detail the process, step-by-step, and consider actions you will need to implement to help ensure your EMI scheme<\/a> runs effectively, so your company can get the most out of it.<\/p>\n\n\n Before you establish a plan there are a handful of EMI qualifying conditions<\/a> your share options, business and employees need to satisfy before you can qualify for the scheme and receive the maximum EMI tax benefits. For example, your business must be:<\/p>\n\n\n To ensure you meet the criteria, refer to our comprehensive list of EMI qualifying conditions.<\/p>\n\n\n Once you\u2019ve established that your business, EMI options and participating employees are eligible, you can now define your objectives for the scheme.<\/p>\n\n\n\n As it\u2019s widely known that EMIs are designed to reward and retain employees, you should think carefully about what you want to achieve specifically because it will hugely determine the scheme rules. For example, consider if performance or retention is your biggest priority. If it\u2019s both, is one more important than the other? This is an important factor when it comes to deciding on vesting rules.<\/p>\n\n\n Now, you can start to design your EMI<\/a> by considering rules like:<\/p>\n\n\n Once the scheme rules have been finalised, you can then produce individual option agreements. Also, don\u2019t forget to make any relevant changes to the company\u2019s constitutional documents (including the Articles of Association and any shareholders\u2019 agreements).<\/p>\n\n\n Getting EMI valuation approval from HMRC can normally take a few weeks. While this process isn\u2019t compulsory, it\u2019s often wise to do so because it can ensure the tax benefits of the EMI scheme will apply, provided all other processes and formalities are followed.<\/p>\n\n\n\n To apply you need to complete a VAL231 form<\/a> online and then download it before submitting it to HMRC via email or post. The form requests information including:<\/p>\n\n\n You will also be required to include a copy of the valuation report in the submission. Once you have completed the VAL231 form and received your valuation report, you can either send both of them by: Once you have your valuation agreed, you can create the share pool to begin issuing share options. You should do it within three months as the approved valuation only remains valid for 90 days from the date HMRC approves it.<\/p>\n\n\n\n Next you can determine how to grant the options. There are some free, professional share scheme platforms out there which can help to assist with the setup of the EMI scheme and EMI option issuance, making long-term scheme management easier and more effective.<\/p>\n\n\n\n It\u2019s also worth noting that most companies require formal approval both from their board and shareholders in this phase before officially granting options to employees.<\/p>\n\n\n You need to have an HMRC account with PAYE set up before you can start using the ERS system. If you do, you can log in here<\/a>. <\/p>\n\n\n\n If not, click here to create one<\/a>. Note: If you don\u2019t have PAYE on your account already, it can take up to 3 weeks to set up.<\/p>\n\n\n\n Once you log in, click \u2018\u2019Submit Employment Related Securities returns\u2019\u2019 and follow the steps to register your scheme. You should receive a scheme reference number within 7 days of registering your scheme.<\/p>\n\n\n Once you have registered your EMI scheme and received the scheme reference number, you will need to notify HMRC about this on or before 6 July following the end of the tax year in which the grant is made. If you fail to notify HMRC within these deadlines you risk losing any tax benefits for you and your employees. Log in here<\/a> to initiate a notification to HMRC.<\/p>\n\n\n Once you\u2019ve received confirmation that HMRC has received your EMI notifications, then you should be all set.<\/p>\n\n\n You will have to add new recipients and remove leavers, as required, while also updating the cap table over time to reflect whatever options have been issued. You will also need to inform HMRC of any changes during the life of the scheme, such as employees leaving, new option grants, or a company exit (a buyout or other ownership change).<\/p>\n\n\n\n With our technology and a team of EMI professionals, J.P. Morgan Workplace Solutions can help you perform the ongoing scheme administration-related duties.<\/p>\n\n\n How to set up an EMI scheme<\/h2>\n \n\n
1. Confirm you qualify for an EMI scheme<\/h3>\n \n\n\n
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2. Define your goals<\/h3>\n \n\n\n
3. Structure your scheme rules & agreements<\/h3>\n \n\n\n
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4. Get an HMRC-approved EMI valuation<\/h3>\n \n\n\n
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– Email: savexternal.mailbox@hmrc.gov.uk<\/a> ; or
– Post: Shares and Assets Valuation, HM Revenue and Customs, BX9 1BJ <\/p>\n\n\n 5. Grant EMI options<\/h3>\n \n\n\n
6. Register the EMI scheme with HMRC\u2019s Employment Related Securities (ERS)<\/h3>\n \n\n\n
7. Tell HMRC about your EMI scheme<\/h3>\n \n\n\n
8. Done<\/h3>\n \n\n\n
Enterprise Management Incentives Schemes, Simplified<\/h2>\n \n\n\n