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EMI – easing the way to employee share ownership

EMI – easing the way to employee share ownership

The enterprise management incentive scheme ‘ EMI’ allows your employees to participate in the future capital growth of your business, without the upfront income tax charge applied when shares are gifted or bought for less than current market value.
If structured correctly EMI can offer an effective way to retain and incentivise key staff.

Under EMI employees receive share options which they can exercise in the future.  The value of the shares is agreed when the option is granted and is fixed.  Provided the employees pay at least this amount to exercise their options no income tax or NIC is due. The shares when acquired, automatically qualify for entrepreneurs relief giving a 10% tax rate on profits.  Here is an example showing how this can work:

Several senior employees of Guiders Limited are given the option to buy 10 £1 shares each in their employer company for £1,000 per share.

They hold the options for five years until the company is sold to one of its competitors.  At that time the shares are worth £10,000 per £1 share.

The employees exercise their options and immediately sell their shares along with all others.  They don’t have to pay out any cash they just receive a net cash bonus of £82,111 (£100,000 proceeds, less £10,000 to exercise the option and tax of £7,890).

There are a variety of ways in which EMI share options can be used to incentivise employees, for more information, please contact Lesley Sutton on 01484 550037 or email

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