Enterprise Management Incentive (EMI)

mrbells

Really hope I am posting this in the right section.

I have recently been offered the opportunity to join an EMI scheme.

The basics of it being that I must meet a sales target each year to earn 1% of the company shares i.e hit 5 years, receive 5%, only hit 3 out of the 5 (consecutive or otherwise) and I get 3%...simples!

Well it would be if I understood the detail behind it. There seems to be an endless amount of information out there to advise the employer how to set up the scheme. However, there is nothing to advise the employee what to look out for, what questions to ask or otherwise.

I'm aware that at the point of receiving the shares, I am liable for a tax payment of sorts but not sure how much percentage wise, though I do believe it is calculated against the approved company valuation a the time of setting up the scheme.

As this is a scheme that offers additional financial benefits and a possible income via dividends, which I ordinarily would not have, I want to be careful not to bite the hand that feeds me. However, I do want to be armed with sufficient knowledge to ensure that I make full use of the scheme and to be able to negotiate the terms where possible.

If any one can shed more light or advise where I can find information, from an Employees perspective, it would be most appreciated.

Thank you.

Richie(UK)

Hi there,

My first thought would be for you to make sure that you understand exactly what it is that you are receiving. In the vast majority of cases employees are offered options over shares - that is, the facility to purchase shares at a later date - rather than actual shares. Typically this later date is on a sale of the company. The purpose of EMIs is usually to try to retain key employees by locking them in to the company (there are usually leaver clauses in the agreements such that options lapse on leaving employment). Also, depending upon the option price (the price you pay for shares when the option is exercised) there is usually no tax liability on the grant of options. Capital Gains Tax may be payable on exercise and disposal but on the plus side, since 6 April 2013, Entrepreneurs Relief is now available in respect of EMIs (usual 12 month holding requirement now includes the period when options are held).

HMRC's guidance may be found here: http://www.hmrc.gov.uk/shareschemes/emi-new-guidance.htm