We have had conversations with a number of clients with EMI option arrangements in place about the impact on their existing EMI options due to the delay to the extension of EU State Aid approval.
What EU State Aid approval you may ask! As a bit of background, one of those behind-the-scene points that doesn't impact the day to day use and implementation of EMI schemes is that it required EU State Aid approval. In short, this is because this share option scheme provides very beneficial tax relief to UK employees and for the UK to do that meant it had to have approval. As part of the establishment of the EMI option scheme by HMRC, EU approval was granted for a set period that expired after 5 April 2018 (at the time this was expected to be the total life span of EMI options as an employee incentive arrangement). However, EMI options remain one of the jewel in the crown employee incentives and HMRC have been working towards getting the extension to the approval but it seems the wheels of bureaucracy turned too slow.
However, what does this mean! Well, there are two points to note.
- HMRC have confirmed that all existing qualifying EMI option arrangements are unaffected by this. This is of course very welcome news.
- If you want to grant new EMI share options then it would be wise to wait until the EU have renewed the State Aid Approval before those share options are granted.
So when 'can' we grant new options I hear you cry. Unfortunately, HMRC are not telling because they say they don't know. We and the rest of the professionals suspect it might be a couple of months. That is why we are still progressing all the preparatory work for clients that want to grant EMI options to their employees and we are then working with our clients and lawyers to work around this fly in the ointment.
We hope this clears up any concern or sheds some light on any messages you may have come across regarding EMIs. However, if there are still any questions you need to run by us then please get in touch.
P.S. Here is the official blurb.
"EU State Aid approval for the EMI scheme, expires on 6 April 2018. The government has, since last year, been following the process of applying to the European Commission for fresh approval and we await the Commission’s final response. We won’t receive this before 6 April 2018 and so those involved in the establishment of EMI schemes and grant of EMI share options need to be aware that there will be a period between the lapse of the existing approval on 6 April and a decision by the EU Commission on a fresh approval. The government is working hard to ensure this period is as short as possible.
HMRC considers that the State Aid approval applies to the granting of share options and therefore that share options granted up to and including 6 April 2018 won’t be affected by this lapse of the approval.
EMI share options granted in the period from 7 April 2018 until EU State Aid approval is received may not be eligible for the tax advantages presently afforded to option holders, and accordingly share options granted in that period as EMI share options may necessarily fall to be treated as non-tax advantaged employment-related securities options."