What is an EMI share option scheme?

An EMI share option scheme grants employees share options that may eventually be worth much more than is permitted within a conventional company share option plan. Granting options via an EMI scheme incentivises staff to work hard and help make the company more successful, because the better the company performs the more valuable their options become. Often, EMI options vet over a certain period, such as four years, or in the event of a company sale or takeover, meaning that all options holders are working towards a common goal or objective. 

The scheme is tax-efficient for employees: they don’t pay any tax when they receive their options and don’t usually pay tax when exercising their options to buy shares. If they then sell the shares to a third party they pay a reduced rate of capital gains tax, as they will qualify for Entrepreneurs Relief, provided certain conditions have been met. The company also receives corporation tax relief when employees exercise their options, which can be a valuable, but often overlooked, tax benefit to the company.

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