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EMI Options and Covid-19

With all businesses more focussed at this time on cash reserves and potentially faced with having to make difficult decisions about their people, we are finding that companies are thinking about EMI options and the ability to reward employees with equity based awards. They are being used as an alternate remuneration strategy for example to compensate staff for temporarily taking a lower salary or as a one-off reward in place of a discretionary cash bonus. The benefits of option schemes can be felt in more ways than pure cash savings too, as they can help to foster a business’ culture and values and help everyone feel part of their team, particularly in these difficult times.

If your business has already granted EMI share options, then now may be a good time to re-visit the share valuation especially if any exercise in future is likely to give rise to income tax liabilities for your employees – we are liaising with HMRC to understand if the economic uncertainties currently faced by the business community will have a direct effect on the levels of share valuations that may be agreed for EMI options.

There is also uncertainty presently about whether putting current optionholders on furlough will be a disqualifying event for their EMI options (as there is a requirement for them to work full-time in the business) and mean that furloughed employees cannot be granted new EMI options. We have raised this point with HMRC and they have confirmed new guidance will be forthcoming in due course. It is hoped a concession will be created to cater for this situation.

We will update you again in due course once we know more on these latter two points.


Posted on 27/05/2020 in Tax News, EMI Options

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