UK and International Tax news

Changes To Working Time Requirements For EMI

Wednesday 2nd September 2020

HMRC has recently confirmed changes to the current working time requirement for Enterprise Management Incentives as a result of COVID-19.

These changes are to ensure that individuals who are furloughed or who have their working hours reduced below the current statutory working time requirement for EMI as a result of coronavirus/COVID-19 will retain the tax advantages of the scheme.

Companies with assets of £30m or less, may be able to offer EMI. Share options may be granted up to the value of £250,000 in a three year period. Income tax and National Insurance contributions are not payable if an individual buys the shares for at least their market value when they were granted the option.

Individuals participating or wishing to participate in an EMI scheme are required to meet the ‘working time requirement’. This means that the employee’s time committed to the company must be equal to or exceed the statutory threshold of 25 hours per week or if less, 75% of their working time.

Where employees are furloughed, working reduced hours or taking unpaid leave, they may not be able to meet the committed working time requirement, which may prevent participants from being granted new options. The Finance Bill 2020 introduced a time-limited exception to the disqualifying event rules so that existing participants of EMI schemes are not forced to exercise their options much earlier than planned. This measure extends the time-limited exception to new EMI share options granted after 19 March 2020.

HMRC will accept that, from 19 March 2020, if an employee who is with or to be issued with qualifying share options has met or would meet the requirements at the time of grant but for reasons connected to the coronavirus pandemic, the time which they would have spent on the business of the company will count towards their working time.

These changes have effect from 19 March 2020 and will come to an end on 5 April 2021.

If you would like more detail on the above, please contact Keith Rushen on 0207 486 2378.


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