Businesses are always looking for different ways to encourage a culture of commitment within their organisations and the Enterprise Management Incentive Scheme (EMI Scheme) is a popular means of doing so. Under the EMI Scheme, companies granted share options to their employees which will allow shares to be received at a later date without ant tax bill arising until the shares are sold.
Unfortunately, many organisations have suffered a downturn in business because of the ongoing Covid-19 pandemic and as a result, earlier this year, the UK government introduced the temporary Coronavirus Job Retention Scheme.
However, for EMI Schemes already in place, this had the unintentional possibility of organisations falling foul of the rules, meaning that staff who were furloughed could lose the associated tax benefits. To comply with the EMI rules, an employee must work for the employer company (or a company within a group) for a minimum of 25 hours per week (or if less, 75% of their working time).
The Covid-19 pandemic has made it difficult for some employees to continue meeting this test because of furlough, unpaid leave or reduced working hours. However, HMRC has announced that where (after 19 March 2020) an employee is unable to meet the full-time working requirements because of Covid-19 related factors, the time that the employee could have spent working for the organisation will count towards their working time, thus allowing the share options to continue to benefit from their advantageous tax treatment, providing both employers and employees keep evidence showing that there is a link to Covid-19.
HMRC has announced that these new rules (unless further extended) will apply for a limited period between 19 March 2020 and 5 April 2021 in respect to options issued before 19 March 2020 and any since that date.
If you would like to discuss this further around your individual circumstances, you can speak to our specialist EMI department.