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Enterprise Management Incentives (EMI) – HMRC evaluates the commercial impact

Enterprise Management Incentives (EMI) – HMRC evaluat..

HMRC has published research that evaluates how tax advantaged EMI options are delivering for businesses.


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The EMI regime

EMI options are tax advantaged share options that can be granted to certain employees of qualifying companies.
In summary, provided no ‘disqualifying events’ occur between the grant and exercise of an EMI option, any growth in the value of the underlying shares will be free of income tax, National Insurance Contributions, and (where appropriate) Apprenticeship Levy on exercise.

The disposal of shares acquired on the exercise of EMI options will be subject to Capital Gains Tax, but can potentially benefit from a reduced 10% rate under entrepreneurs’ relief.

HMRC’s research

HMRC recently published research it commissioned to evaluate the effect EMI has had on recruitment, retention and performance for participating companies.

The key findings are summarised below:

  • Perhaps unsurprisingly, most companies that implement EMI are smaller enterprises in growth phase;
  • A majority of the companies surveyed reported that EMI options assist in retention and improve workforce morale;
  • More than half reported that EMI options assist them to attract and recruit high quality key employees; and
  • Employers generally perceived EMI to be successful in helping companies grow and develop.

In addition, most of those surveyed found EMI easy to use, although a minority experienced challenges in relation to administration of the plan.


How KPMG can help

KPMG can assist employers to select, design and implement EMI and other tax advantaged incentive arrangements.

If you have any queries, or would like to talk through EMI or other employee incentive arrangements, please get in touch with your normal contact or e-mail

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