Questions over the future of EMIs
Chris Downing, Director

As part of last year’s Budget, the Chancellor announced that the government would review the Enterprise Management Incentive (EMI) scheme to make sure that it provides support for companies to recruit and retain the best talent.

What’s an EMI scheme?

An EMI is a HMRC approved share option plan, designed to help businesses keep and incentivise key employees, in a tax efficient manner.

Practically, a consultation means that the government is looking to understand whether EMIs should be extended to include more companies, or, if the scheme is not fulfilling its objectives to help high-growth businesses scale up effectively – whether a replacement for EMIs is needed instead.

What’s happened already?

A short consultation period has now closed, so we wait to learn the findings from the review – and what this means for the future of EMIs.  From experience, a government review often signals that the writing is on the wall, or at least some significant changes are on their way.

Since EMIs were introduced in 2000, they have become popular with owner-managed businesses looking to incentivise employees. One of the key benefits for employees is that there’s no tax charge when they are granted the shares, so they don’t pay tax until the shares are exercised and that tax charge is much reduced compared to outside of the scheme.

Our advice

We are regularly asked for advice by clients about the most suitable schemes for incentivising and rewarding employees – although not suitable for every business, EMIs are often near the top of the list, because of the scheme’s flexibility and generous tax breaks.

Next steps

Our advice, if you are considering an employee share scheme in the coming months, is to speak to us – sooner rather than later – as we don’t know how long EMIs will be around for, and it certainly looks like fundamental changes may well be on the way.

We will then be able to guide you on the best steps to take.

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