What is an EMI share scheme?

Are EMI shares worth it?

The first and main benefit of EMI is the array of tax benefits for employees. There is no income tax to pay when the options are granted, or when the options are exercised to buy the shares. When an employee sells their shares, they will keep 90% of any profit. Without EMI, they might keep less than half of it.

Do employees pay for EMI shares?

For example, it is possible to limit voting rights, provide for pre-emption or set other conditions in respect of shares which will be acquired on exercise of an EMI option. The shares must, however, be fully paid ordinary shares so that employees have a right to share in the profits of the company.

How long do you need to hold EMI shares?

When someone sells the shares that they’ve acquired via EMI options, they qualify for Entrepreneurs’ Relief, so long as at least 12 months (or 24 months from April 2019) have passed from the date of grant to the disposal of the shares.

IT IS IMPORTANT:  How can I share my laptop WiFi to my router?

How does the EMI scheme work?

EMI stands for Enterprise Management Incentive scheme. An EMI scheme is a type of tax-advantaged employee share scheme. EMI share incentive schemes allow employers to issue share options (the right to acquire shares in a company) to key employees, incentivising them to work hard and make the business a success.

How long does an EMI scheme last?

These are important questions, especially if your EMI option scheme is based on employee options being exercised on an exit event. All EMI option contracts are valued for a timeframe of 10 years only.

What is EMI benefit?

The first and main benefit of EMI is the array of tax advantages for employees. There is no income tax to pay when the options are granted or when they’re exercised to buy the shares. When an employee sells the shares, they will pay only 10% Capital gains tax on any profit.

What happens to EMI shares when an employee leaves?

The EMI legislations allows a period of 90 days during which a former employee can exercise their EMI option without adverse tax consequences. After that 90 day period the option gain becomes liable to income tax (or PAYE if at exercise the company is about to be sold).

How do share option schemes work?

Share-option schemes

A share option is the right to buy a certain number of shares at a fixed price, some period of time in the future, within a company. Employees can generally exercise their share options – ie buy the shares – after a specified period, known as the vesting period.

IT IS IMPORTANT:  Quick Answer: What is the share price today?

What is EMI in UK?

An EMI (Enterprise Management Incentive) is a share options scheme for employees of UK-based businesses. EMI schemes – which are incredibly tax efficient for employer and employees – are now used by more than 12,000 companies.

How do I set up an EMI scheme?

The EMI scheme set-up process

  1. Establish if your company and employees are eligible for EMI.
  2. Design the EMI scheme.
  3. File with HMRC for valuation agreement.
  4. Obtain corporate authorisations including establishing employee share pool.
  5. Grant the first round of share options to employees.

Who is eligible for EMI shares?

EMI options can only be granted to employees who are required to work for at least 25 hours a week, or, if less, at least 75% of their working time must be for the company. Employees who have a ‘material interest’ of more than 30% of the share capital before the options are granted are excluded from participation.

Is EMI tax free?

The EMI paid by you has two components – principal repayment and interest paid. The amount repaid as principal component in the EMI can be claimed as a deduction under section 80C of the Income-tax Act, 1961 for self-occupied property.

Do EMI shares have to be voting shares?

The options must be capable of exercise within 10 years of grant. The option must be over ordinary fully paid-up shares, although they can be different class of share i.e. non-voting or growth shares. It cannot be over redeemable or preference shares.