On 4 April 2018, HMRC published Employment Related Securities Bulletin No 27. This Bulletin is an important update for companies that operate enterprise management incentive (EMI) option plans, particularly those companies that 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. At Spring Budget 2017, the government confirmed that it would seek State aid approval to extend the provision of EMI tax relief beyond 2018. In its Bulletin, however, HMRC informed companies and advisers that the European Commission had not yet granted fresh approval (and would not do so before the previous approval expired on 6 April 2018).
Companies proposing to grant EMI options need to be aware that EMI options granted in the period from 7 April 2018 until EU State aid approval is received may not be eligible for tax advantages. This means that they would be subject to income tax and typically also employer’s and employee’s national insurance contributions on exercise. Accordingly, HMRC advised that companies may wish to consider delaying the grant of options intended to qualify as EMI options until fresh EU State aid approval has been given.
The Bulletin confirms that the government is working hard to ensure this period is as short as possible and HMRC will provide a further update in due course. We understand that the government is working with the Commission to seek to backdate the State aid approval, and it is to be hoped that this can be achieved.
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Companies are reminded that the online notification and valuation services provided by HMRC in relation to EMI options remain available during this period. The Bulletin confirms that EMI options granted up to and including 6 April 2018 will not be affected by the lapse of the approval. Any companies that granted EMI options before (or indeed after) the Bulletin was published are reminded that they must still notify the grant of the options online to HMRC using the Employment Related Securities service, within 92 days of the date of grant.