A disqualifying event removes tax advantages from an EMI option after 90 days. Once disqualified, the EMI option will have the features of a non-qualifying option. See ‘How different are non-qualifying options?’
If a disqualifying event occurs, an EMI option will retain its tax advantages if it is exercised and the shares sold within 90 days. You would want to carry out an EMI valuation if an EMI option is exercised to make sure that there is no disagreement with HMRC on taxable amounts later. A disqualifying event can relate to a specific employee or to the company (in which case affecting the company and all its employees).
Some common examples
Relating to an employee
- Leaves the company
- Works less than 25 hours per week
Relating to the company
- No longer independent
- Business mix changes means that it no longer meets the trading activities requirement
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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.