Enterprise Management Incentives (EMI)

For a business to utilise an Enterprise Management Incentive (EMI) Scheme they must have under 250 employees and have under £30 million in gross assets. An Enterprise Management Incentive (EMI) Scheme can dispense no more that £250,000 worth of shares per individual.

Employees have to work at least 25 hours per week or spend at least 75% of their time working for the company to qualify for an Enterprise Management Incentive (EMI) Scheme. Any employee who also owned 30% or more of the share capital before the scheme was introduced cannot take part in it.

Although there aren’t many restricting factors that would make an employee exempt from an Enterprise Management Incentive, there are some disqualifying events to be aware of:
• The business gets bought and falls under the control of another company
• The company failing to meet the trading activities test
• A significant variation in the terms of the option
• A non-commercial alteration to the share capital of the company that increases the value of shares under option.
However, if the Enterprise Management Incentive option is used within 90 days of the disqualifying event then all Income Tax and National Insurance Contribution benefits are kept.

Enterprise Management Incentive (EMI) Schemes allow employees to be rewarded with shares in the company without being taxed a combine total of 60.8% through Income Tax and the employee and employers National Insurance contributions as it would be classed as a cash bonus or unapproved option. Instead the employee will only be taxed through Capital Gains Tax at a rate of 10%.