Most companies qualify to use EMI options as a means to incentivise their employees. We think it is always worth double-checking with HMRC that your company is EMI eligible (this process is called ‘advance assurance’). We will do this for you. HMRC normally take 2 weeks to confirm, but we can be working on other aspects of setting up the EMI option scheme in the meantime.
We’ve set out the most significant requirements below for EMI options – contact us if you have questions on these EMI requirements.
Trading activities – The company (or for a group, the activities of all group companies) should trade with the intention of making a profit. The activities should not to a substantial extent include any of HMRC’s listed non-qualifying activities for EMI purposes, such as:
- dealing in land, commodities, futures, shares, securities or other financial instruments
- dealing in goods, otherwise than in the course of an ordinary trade of wholesale or retail distribution
- banking, insurance, money-lending, debt-factoring, hire purchase financing or other financial activities
- leasing (including letting ships on charter or letting other assets on hire)
- providing legal or accountancy services
- property development
- farming or market gardening
- holding, managing or occupying woodlands, any other forestry activities or timber production
- shipbuilding, producing coal or producing steel
- operating or managing hotels or comparable establishments, such as a guest house or hostel, or managing property used as a hotel or comparable establishment.
Receiving royalties or licence fees is usually classed as a non-qualifying activity, unless the income is substantially generated from intellectual property that has been generated by the company or group of companies.
Gross assets – The gross assets of the company (or the group) must not exceed £30 million (at the time of grant of the EMI options).
Employees – The company (or the group) must have fewer than 250 employees (at the time of grant of the EMI options).
Independent – The company must be independent and not under the control of any other company.
UK permanent establishment – The company does not need to be incorporated in the UK but it must have a ‘permanent establishment’ in the UK. This is defined as a fixed place of business, or agents based in the UK either of which must relate substantively to the business of the company (or the group).
Qualifying subsidiaries – Any subsidiaries must be qualifying subsidiaries. Broadly, this means that the parent (or another subsidiary) must own at least 51 per cent of the share capital and fully control that subsidiary.
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Please Note: This article contains general information only and Simply Equity is not, through this article, issuing any advice, be it legal, financial, tax-related, business-related, professional or other. This article is not a substitute for professional advice and should not be used as such. Simply Equity does not assume any liability for reliance on the information provided in this article.