Updates to EMI Options in the Spring Budget 2023

Simplifications to the process for granting tax-advantaged Enterprise Management Incentives (EMI) share options have been announced as part of the Spring Budget 2023. These changes will be welcomed widely by companies operating EMI schemes, or those seeking to set up an EMI scheme in the future.

From 6 April 2023, the requirement for a company to include details of restrictions affecting option shares within the body of an option agreement will be removed. In addition, companies will not be required to provide a declaration that employees have signed a working time declaration when they are granted an EMI option. These two changes will simplify option agreements and assist companies in the process to grant new options. The measures will also apply to existing unexercised EMI options.

As well as simplifying the grant process, in practice this change will also streamline the takeover processes for companies that have these EMI schemes in place as compliance failings in these areas are not uncommon, and often result in delays to the transaction timetable and additional costs being incurred by advisers trying to resolve the issue.

The Chancellor has also announced a change to a key compliance obligation involving the deadline by which a company must notify HMRC of the grant of EMI options. Presently, companies must notify HMRC within 92 days following the grant of each EMI option (a date which can be inadvertently missed, or breached by delays when registering a share scheme for the first time). From 6 April 2024, this will be changed to a fixed date of 6 July following the end of the tax year in which the options were granted. This aligns the notification obligation with the date that a company must file its annual EMI end of year return, resulting in all EMI option-related events (such as new grants, leavers, option lapses, and exercise events) being streamlined and reportable at the same time each year.