Enterprise Management Incentive Options & Entrepreneurs’ Relief
Entrepreneurs’ Relief is available to employees and officers disposing of qualifying Enterprise Management incentives (EMI) shares and due to recent budget changes, the conditions have slightly changed.
The eligibility of shareholdings for Entrepreneurs’ Relief, which reduces the tax rate on capital gains from 20% to a lower rate of 10%, is usually only available to qualifying individuals on qualifying disposals of shares held for 24 months prior to disposal. A ‘qualifying individual’ is an employee or officer of a trading company (or a company in the same trading group) who held at least a 5% shareholding in a company, which in turn entitled them to at least 5% of the voting rights, dividend rights and rights to proceeds on winding up in that company.
Where a qualifying EMI option is exercised, and the EMI option was granted at least two years before the date of the disposal of the EMI shares, then Entrepreneur’s Relief will be available on a disposal irrespective of the size of the individual’s shareholding.
As the two year qualification period runs from the date of grant as opposed to the date of exercise, it is possible to exercise the EMI options and sell the shares on the same date, which provides cash-flow and tax advantages.
In order to qualify, the individual must be an employee/officer of the company (or a company in the same trading group) throughout the two years ending with the date of the disposal of the EMI shares, and the shares must meet the requirements of the Enterprise Management Incentive Scheme.
For those companies considering implementing an EMI scheme for employees, this additional eligibility make the scheme an attractive tool for recruiting and retaining high calibre employees.
- Seed Enterprise Investment Scheme
- Research and Development
- Patent Box
- Creative Sector Tax Reliefs
- Enterprise Management Incentive ("EMI") Options and Entrepreneurs' Relief
- Capital Allowances: Integral Features