Pros and cons of using Share Scheme Platforms to implement an EMI scheme

An Enterprise Management Incentive (“EMI”) scheme is a tax-advantaged HMRC approved share option scheme. It works by granting an option to an employee to receive the right to a number of shares if particular exercise conditions are met at a future date. 

We are seeing an increasing number of ‘platforms’ offering an easy route to agreeing the market value with HMRC for implementing EMI option schemes, but what are the pros and cons of doing this?

Under an EMI, provided the exercise price is no less than the Actual Market Value at the date of grant, there is no income tax or National Insurance Contributions charged on the exercise of the options for shares.

Only Capital Gains Tax, and likely Business Asset Disposal Relief, will apply on the eventual sale of the shares.

HMRC also offers an opportunity for the employer to agree the market value of the shares under option in advance of the options being granted, which is typically not offered by HMRC in any other situation.

Due to the significant tax benefits afforded to EMI schemes, they are a great way to incentivise, reward and retain key employees with a vested interest in the success of the company.

However, there are qualifying conditions that must be met by the employee and employer.

As a result of their popularity, we are seeing an increasing number of ‘platforms’ offering a quick and easy route to agreeing the market value with HMRC for implementing EMI option schemes.

Not all platforms are the same however, and there are typically a number of advantages and disadvantages to using them, such as:

Pros

• The process is managed via an online portal
• All the documents relevant to the grant of EMI options are held digitally on the portal
• option holders and the company can log in separately to see their respective EMI documents
• They offer a guided service, and you can adjust the amount of support you require with your application
• Promised access to inhouse experts for a fixed fee per month

Cons

• Not having clear visibility of your advisors or their credentials
• Not knowing what level of input, assistance or support you need from the advisors
• The template documents used by some platforms may not be fit for purpose in your circumstances
• Not having access to wider accounting or tax services, or tax planning opportunities
• If your company’s shareholding circumstances are complicated, specialist advice is likely to be required.

Share schemes are intrinsically complicated and tax law is also complex. Tax advisors and lawyers are qualified to understand and interpret the legislation to ensure you don’t get caught out.

There are several reasons why you may want to use a platform but, you should not overlook the value that a specialist advisor brings when implementing an EMI scheme.

Further information

If you would like to discuss a new or existing EMI or other share scheme, please do not hesitate to contact a member of our tax team.

EMI share options

See also our other articles on EMI share option schemes:

• What are the ongoing compliance requirements after granting an EMI option?
• Why should I implement an EMI scheme over a cash bonus?
• What are the advantages of agreeing an EMI valuation?
• The Top 5 reasons why EMI share option schemes go wrong