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Treatment of Discretions in relation to EMI Options

Treatment of Discretions in relation to EMI Options

As you may be aware, HMRC have recently been taking a harder line on the treatment of the exercise of discretions in EMI option documents, with the result that they have been taking the view that where a discretion is exercised, an EMI option should be taxed as an unapproved option to the extent of the exercise of the discretion. It is common for EMI option contracts to include discretions to give the directors flexibility in certain areas, for example in relation to matters such as allowing a leaver to retain or exercise an option, allowing acceleration of time or performance based share vesting on an exit event, or treating an event that does not quite fall within a defined set of “Exit Events” as an opportunity to exercise the option.

We understand that HMRC now accepts that they may have previously taken too harsh a view in this regard (at least in respect of certain types of discretionary powers) and will be issuing guidance shortly to clarify their position. We will of course let you know as soon as we have this guidance but in the meantime if this is a live issue on any of your deals please get in touch.


Posted on 31/01/2022 in EMI Options, Employee Incentives

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