EMI schemes after Brexit

EMI schemes after Brexit

According to the statement of HMRC, EMI schemes will remain to be effective after Brexit transitional period. These schemes allow some businesses to provide workers nontaxable share options worth up to £250,000; they do not expire and will be applicable in the post-Brexit period.

What can companies hope for?

As of now, there are multiple limitations on which companies can use EMI options and which employees can also be given some options. The HMRC had not made any explanations on how the EMI Scheme could be modified to assist high-growth companies, however, there are several ways that this could be implemented.

  • Some limits could be prolonged – For instance, the max. gross assets (£30,000,000), max. individual (£250,000), and company limits (£3,000,000) may look to be enlarged by the local governmental authorities. This would make the scheme broader and allow more companies to use EMIs.
  • Worker time conditions could be prolonged – Employees that wish to become participants in an EMI scheme are obliged to satisfy the “working time obligation” – which must be over 25 hours/7 days or 75% of their operational time. This term could be extended to cover more workers on other than full-time working basis, which would be a mutually-beneficial amendment.

Tax benefits of the EMI scheme

One of the greatest pros of the EMI is that it can minimize the net capital gain tax rate liability on a future sale of shares to 10%. The authorities have however introduced a report on Capital Gains Tax which proposes a substantial increase in rates – but now this is not clear if these proposals will be affected.

EMI post-Brexit

The operation of EMI schemes in the UK necessitates that the Government obtains state aid approval from the EU, which was last time renewed in May 2018 and applied to April 2023. But following the expiration of the Brexit transition period at the end of 2020, this EU approval is no longer needed.

HMRC has confirmed that EMI schemes will be effective under the local law. Generally, these measures provide comfort conditions to workers that have been affected by the pandemic, providing flexibility where changes have been necessary to their working patterns, and confirmation that these schemes will remain to be available in the coming years.

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