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July 1, 2019

HMRC Extends EMI Valuation Window

In welcome news for those setting up EMI schemes, HMRC has announced that the window for agreeing EMI share valuations has been extended from 60 to 90 days.

The Announcement

HMRC made the announcement through the Employment Related Securities Bulletin 32 (June 2019).

You can find the full bulletin here.

What are EMIs?

As covered in our previous blog, EMIs are a type of tax advantaged share scheme that allows companies to reward, retain, and incentivise select staff.

EMI schemes operate by allowing companies to give select staff the opportunity to buy shares in the company at a price set when the share option is agreed.

The Importance of Correct Valuations

If EMI share options are priced at the market price when the option agreement is made, then the option holders may be able to exercise their options in future without paying income tax or NICs.

However if share options are priced at a discount, then this can result in unexpected income tax, National Insurance contributions, and cash flow problems.

HMRC would normally only review an EMI option price after the option has been exercised.  This could be many years after it was granted.

Therefore to avoid this uncertainty, HMRC has a special facility which allows companies to agree the price of their shares before any options are granted.

The Extended Window

Only once HMRC agrees a share price can the documentation for an EMI scheme be finalised.

These documents need to be signed and completed within HMRC’s valuation window or else a new share price will need to be agreed.

Finalising these documents can involve a significant amount of work so the extended window of 90 days will be welcome news for those setting up EMI schemes.

If you have any questions about EMIs, please contact a member of our team today.

Related Articles

A Slice of the Action: Company Share Schemes (Part 1) (20 March 2019)

State Aid Approval for EMI Options Renewed (17 May 2018)

State Aid Approval for EMI Options Lapses (10 April 2018)

Contact us today to discuss your tax requirements.
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