Urgent news on EMI options
Late on 4 April 2018 HMRC published a bulletin regarding enterprise management incentive (EMI) option plans, which is particularly important for those companies which are proposing to grant EMI options in the near future.
By way of background, the EMI tax regime is subject to the EU State Aid approval rules. The government confirmed, in last year’s Spring Budget, that it would seek State Aid approval to extend the provision of EMI tax relief beyond 2018.
HMRC’s bulletin confirms that, despite the government following the process of applying to the European Commission for fresh approval, the Commission’s final response is still awaited and will not be received before the EU State Aid approval for the EMI regime expires on 6 April 2018.
What does this mean?
All companies that operate EMI option plans should:
- To the extent possible, grant any pending EMI options by midnight today
- understand that EMI tax treatment may not apply to options granted on or after 7 April 2018 and before the date when EU State Aid approval is obtained and may instead be treated as non tax-advantaged employment-related securities options;
- consider delaying the grant of any EMI options until EU State Aid approval is obtained; and
- note that HMRC considers that the State Aid approval applies to the grant of share options and so the tax-favoured status of EMI options granted up to and including Friday 6 April 2018 will not be affected by the expiry of the current approval.
Clearly this is an unsatisfactory state of affairs, especially given the very short notice provided by HMRC, and it is uncertain when EU State Aid approval will be given. The European Commission has previously backdated other EU State Aid approvals for EMI and other tax reliefs and, whilst we would hope this would happen in this case, this cannot be relied upon.
Please see HMRC’s announcement in the link below:
A further update shall be provided by HMRC in due course.