EMI option schemes are an essential tool for startups & growing companies to incentivize employees. Seed and VC investors often expect you to have an employee incentive scheme in place. EMI options are super flexible and tax efficient.

Since launching this service in 2013 we have seen high demand from our clients for EMI. We can set up your option scheme quickly and at very competitive costs. All our EMI option schemes are HMRC approved. We will liaise with HMRC EMI Option Team in Nottingham in order get your scheme approved.

Tax Benefits for EMI Option Schemes:

• 30% discount to market value of Shares
• 0% tax payable on grant of EMI options
• 10% tax payable on sale of EMI option shares *
• 20% saving on EMI Scheme set up and admin costs

* EMI schemes fall into the Entrepreneurs Relief capital gains tax (CGT) rate. Employees can also use annual CGT exemption (£11,100). This highly attractive CGT rate has been available for all employees, regardless of how small their share in the company, since the 2012 Budget.

EMI schemes are primarily aimed at helping smaller companies retain employees and grow. Our clients – many of which are startups and scale-ups – are ideal for EMI options. The criteria are relatively simple to meet:

• Less than 250 employees
• Less than £30m gross assets
• UK office
• EMI Options must be granted from the top group company, not a subsidiary
• EMI employees must work 25 hours per week or 75% of paid working time
• EMI employees must not hold significant shares in the Company (<30%)
• EMI options cannot be granted from certain excluded companies, such as financial services & certain fintech, leasing & property development

1. You discuss terms of EMI scheme with WNL
2. We prepare HMRC valuation approval pack
3. HMRC approves EMI valuation (normally at 0-30% discount to market value of the Shares)
4. WNL prepares EMI option contracts (in stand-alone or scheme format)
5. Option contracts finalized and issued to Employees
6. WNL prepares guide to EMI option scheme for Employees and the company
7. Reporting EMI option scheme to HMRC (within 92 days)

• Qualifying Companies – care must be taken for fintech startups and insurtech startups to ensure you qualify. We normally recommend submitted an Advance Assurance request to HMRC, which our team can assist with. If you have SEIS or EIS approval already from HMRC, this is a good indicator in some cases.
• Option Strike Price – care must be taken to set the correct EMI option exercise price. If the exercise price is set at or above the market value of shares agreed with HMRC, no income tax or NI is payable on grant or exercise. If the exercise price is nil or below the HMRC agreed value, income tax will be payable on exercise of the EMI options.
• HMRC Reporting – EMI option schemes must be notified to HMRC within 92 days of set up and also annually showing details of the EMI options granted within the tax year. We can help with this on your behalf and the costs of using our services can be deducted against corporation tax.
• Limits – no employee can hold more than £250,000 EMI options within a 3 year period. This threshold sometimes comes into play with high growth startups, but in most cases our startup and scale-up clients don’t breach this limit. So you know, if you breach the threshold, the options which exceed the limit are still valid but EMI tax advantages are lost.
• Contractual Legal Terms – there are a number of technical legal terms which must be included in the EMI option contracts. For example, EMI options cannot be transferred by employees. We handle this part on your behalf and ensure your legal contracts are robust.

If you’re launching an EMI Option Scheme, it’s critical you take advice so that your EMI contracts and process is HMRC compliant. We can help guide and protect you through the entire process. If you are pitching to VC & seed investors they will be happy to see that you have a tax efficient option scheme in place.

We can also set up other HMRC approved share option schemes like CSOP, as well as unapproved options for your advisors and non-executive directors.

All of our EMI Option templates are maintained and incorporate the most up to date terms from HMRC. If you would like to know more, contact us for a free EMI option guide.