FB: Enterprise Management Incentives – working time easement extended

FB: Enterprise Management Incentives – working time

FB 2021 extends the EMI working time relaxation until April 2022. However, you might need to take steps now to protect EMI tax advantages.


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Relaxations to the Enterprise Management Incentives (EMI) legislation made in response to the coronavirus outbreak were set to end on 5 April 2021. These will now extend to 5 April 2022, but employers might need to take steps now to ensure they and their employees benefit.

EMI share options

The EMI scheme offers the most flexible and generous UK tax advantages of any employee share options. However, certain conditions must be met for an employee to be granted a qualifying EMI option.

Amongst these is the ‘working time requirement’: that the employee devotes at least 25 hours per week or, if less, 75 percent of their total working time, to the business of the relevant company.

Additionally, an employee must usually continue to meet the ‘working time requirement’ until the date on which they exercise an EMI option in order to retain its full tax advantages and be taxed at lower CGT rates. If they do not, in certain circumstances, income tax and employee’s NIC at up to 47 percent (or 48 percent for Scottish taxpayers), plus employer’s NIC at 13.8 percent, will arise on any growth in value of the underlying shares.

Temporary relaxation of the working time requirement

Subject to limited exceptions for ill health etc, any reduction in an employee’s working time could in principle prevent them being granted new EMI options, and potentially jeopardise the tax advantages of EMI options they already hold. However, a temporary change to the EMI rules was announced last year.

This means an employee will not be prevented from meeting the working time requirement solely because, due to the coronavirus outbreak, they are:

  • Furloughed;
  • Working reduced hours; or
  • Taking unpaid leave.

This temporary change applies from 19 March 2020 and was originally due to end on 5 April 2021. However, legislation has been brought forward in Finance Bill 2021 to extend this relaxation to 5 April 2022.

Do employers need to take any action?

HMRC have confirmed that employers and employees must retain evidence demonstrating a link between the coronavirus pandemic and the relevant reduction in working hours (i.e. that the reduction in working hours below the required minimum results from the pandemic, rather than from some other cause). For employees who have been furloughed under the Coronavirus Job Retention Scheme (CJRS), the furlough agreement between the employee and employer should provide this evidence.

However, for employees who have taken unpaid leave, or who have worked reduced hours, without being furloughed under the CJRS, employers should ensure the link between the coronavirus outbreak and that leave or those reduced working hours is appropriately documented, and copies of that evidence retained by the employee and employer. This is important to protect against any future challenge to the qualifying status of employees’ EMI options, either from HMRC or from a potential purchaser during a future due diligence exercise.

For further information please contact :

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