Common Errors when Setting up an EMI Options Scheme

Published on: October 4, 2017 | by: James Farha

Many founders feel that an EMI share options scheme is something they can manage on their own.

It’s certainly true that the documentation takes a well-established form and if you are resourceful you can find your way to getting the documents together.

However, most founders that we have worked with to date who have implemented or attempted to implement an EMI scheme have fallen foul of one of the following:

1. Not checking that the company is eligible to issue EMI options

The company must be eligible to issue EMI compliant options to its team members. If the company isn’t eligible to do so, then your team members won’t get approved options and the options won’t be eligible.

You can use our eligibility checker here

2. The employees must be eligible

You must confirm that the employees are eligible to receive the options as well. If the individuals being granted the options don’t meet the criteria, then they won’t get the tax benefits of EMI.

You can use our eligibility checker here

3. The scheme must be registered with HMRC

If the scheme hasn’t been registered with HMRC then it isn’t an employee management incentive scheme. It’s just an options scheme and the employees will be taxed on the options as if they are income.

4. HMRC have not agreed the valuation of the shares over which options are being granted

To ensure the option is an EMI compliant option, you need to make sure that the pricing of the grant of options has been agreed with HMRC in advance. The valuation from HMRC is only valid for 60 days from the date of issue – so if you don’t grant the options in that time period, then you will need to go back to HMRC for an extension or a fresh valuation.

5. The grant of options hasn’t been registered with HMRC

Each individual grant of options must be registered with HMRC within 92 days of the date of grant. If you fail to do so (and can’t offer a valid reason to HMRC) then you will have to repeat step 4 and step 5 in order for the options to get the benefit.

We’ve structured our service specifically to deal with these issues so you don’t have to worry about them. If you have any questions or want to find out more, don’t hesitate to get in touch via our contact page and one of the team will call you back.


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