An Equity Reward Scheme could be just what you need

A tax efficient way to incentivise, recruit, retain and reward key staff. An equity reward scheme could be a great option for you. Studies show that businesses that have adopted an Enterprise Management Incentive (EMI) have an increased productivity rate when compared to those that don’t.

What is an EMI?

An EMI allows small and medium-sized enterprises (SME’s) to grant share options to employees, at a tax advantage for both parties. This can be essential to help recruit, retain and incentivise employees – the essential individuals who can support your business to grow and thrive.

 

Advantages of an EMI

  1. Employees benefit if the options price is no less than the market value at the date of the grant as they receive no income tax or national insurance charges on the grant or the exercise.
  2. Business Assets Disposal Relief (a 10% rate of capital gains tax) might be available on the growth in value of the shares on disposal.
  3. There will be a corporation tax deduction for the full amount of financial gain provided to employees who exercise their options.
  4. The employer can select which employees will benefit and can incorporate performance objectives into the scheme.
  5. EMI incentivises employees encouraging long-term commitment from participating employees.
  6. EMI schemes are straightforward to implement and run and are very effective.

Do you qualify?

Some of the main criteria to qualify are as follows:

  1.  Your gross assets total £30 million or less.
  2.  You have a qualifying trade and have a presence in the UK.
  3.  You have fewer than 250 employees who work for the company.
  4. Employees who participate in the EMI scheme must work for the company for at least 25 hours per week or 75% of their total working time (including other employments or self employment) if this is less.
  5. Any subsidiaries must be more than 50% owned and any property management subsidiaries must be at least 90% owned.
  6. An employee (together with his or her spouse, ancestors and descendants) can have an existing holding of up to 30% of the company.

 

If you want to explore how you can access this valuable tax relief, please get in touch with one of our specialist team to see if you qualify and to understand the benefits for your business. Please contact:

Steve Holmes | Business Tax Directorsupport@garbutt-elliott.co.uk 

Angela Mikola | Senior Tax Managersupport@garbutt-elliott.co.uk 

Zoe Flanagan | Senior Tax Advisor – support@garbutt-elliott.co.uk