Enterprise Management Incentives (EMI) allow employees the option to acquire shares in the company at some point in the future i.e. on being with the company a set number of years, reaching a pre-determined turnover level or other relevant conditions as set by the company.
An option to purchase shares in the company can be attractive to employees as they will see a growth in the value of their personal asset as the company similarly grows. As the share option (or shares if exercised) would need to be returned to the company should the employee leave, employees may feel a higher degree of loyalty to the company.
The benefit is that the price of the shares is set at today’s rate, yet the options may not be exercised for up to ten years. Any growth in value from the current date to the date on which the shares are sold is subject to capital gains tax.
Providing that the EMI share options and the shares themselves are held for a combined period of 12 months, the employee is entitled to entrepreneur’s relief and a 10% tax rate on the disposal. This is much more attractive than the potential 40% or 45% tax payable on employment income.
If you are interested in finding out more information on EMI share options and rewarding some of your staff in this way, please do not hesitate to contact our Tax Director, Kirsty Murray, on 0131 473 3500 or firstname.lastname@example.org.
Scott-Moncrieff is one of Scotland’s leading independent firms of chartered accountants and business advisers.
For more information, visit: www.scott-moncrieff.com
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