PISCES | Updated HMRC guidance and draft legislation

PISCES: amending existing EMI and CSOP options

HMRC has been consulting on draft legislation to allow the terms of existing Enterprise Management Incentive (EMI) and Company Share Option Plan (CSOP) options to be amended to include a right of exercise where resulting shares will be immediately sold on PISCES, without losing their tax-advantaged status.

The main requirements of the draft legislation are that:

• options must have been granted before the Finance Bill 2025/2026 receives Royal Assent and amended on or after 15 May 2025;
• the sole effect of the amendment must be that, if option shares are or will be "PISCES shares", the option may be exercised (to any extent), provided the resulting shares are immediately sold on PISCES; and
• the amendment must be made by written agreement to which the option holder is a party or must be notified in writing to the option holder (helpfully, this requirement has been widened out to include written notice).

The consultation on the draft legislation closed on 15 September and updated legislation will be published in due course. Royal Assent of the Finance Bill is expected in spring 2026.

HMRC guidance updated

HMRC has also further updated its technical note on the tax implications of employees trading shares on PISCES (originally published as part of the Spring Statement 2025 in March).

The updated technical note confirms how existing CSOP and EMI agreements can be amended to include PISCES (in particular that clauses giving the board discretion to permit exercise cannot be used to allow exercise in connection with a PISCES trading event – PISCES must be included in the option terms as a specific exercise event).

The note also clarifies the application of the readily convertible asset (RCAs) rules (which are relevant to determining whether any income tax is payable through PAYE and National Insurance contributions are payable).

HMRC notes that the principles set out in its technical note in relation to the RCA rules and trading on PISCES also apply to trading of private company shares generally. It will be interesting to see if HMRC updates its wider guidance to reflect this.

Next steps

Any private companies currently exploring PISCES that have granted EMI and CSOP options may wish to review their option agreements and/or plan rules in the light of the draft legislation and guidance. To qualify for tax relief, any such amendments would need to satisfy the final legislative requirements and be implemented in accordance with the applicable power of amendment set out in the option documentation.

In respect of new awards that are intended to be exercisable on a PISCES trading event, specific drafting to cover PISCES should be included in the plan rules and/or option agreement at the outset.