The term EMI stands for Enterprise Management Incentive, a scheme in which you provide a share option to your employees, which can have great tax advantages. If you are a new business, then you probably have no idea what EMI is or how it can be of benefit to your company. By taking advantage of EMI options, you have the ability to enjoy healthy business finance, watching as your company continues to grow and expand.
With a share option scheme, you can offer employees a legal right to purchase shares in the company at a later date, which will include favorable tax treatment. Both high-risk and high-growth companies find EMI options popular, such as tech start-ups. With this option, companies can attract and reward as well as retain hard working employees.
Tax benefits will not be seen unless the company and the employee are able to meet specific conditions. It is important to work with an EMI solutions provider so that you can have your company and employees checked for qualification, valuation and have the scheme rules designed. Agreements will need to be drafted and amended by professionals with registering and notification provided to the HMRC.
Understanding a Share Option Scheme
To begin, you need to understand the share option scheme. This type of plan will provide your employees with the right to acquire shares within the company in the future. However, a price of those shares will be fixed at the current moment. The goal is to recruit and retain employees that are valuable to you by rewarding them for investing within your company.
The value of the shares provided will increase over time after the options have been granted which allows employees to enjoy significant gains. Such options can be granted that will allow shares worth higher amounts to be granted without income tax being paid or national insurance.
How to Qualify
As a company looking to offer an EMI scheme, you first must learn if you qualify. A company that qualifies for this scheme type will need to have gross assets of £30m or less, be based in the UK and have less than 250 employees on staff. The business must also be participating in a qualifying trade and have a view to realizing profits.
A qualifying trade is considered anything that is not an investment of land, financial instruments, shares, leasing assets, financial services and other categories. Employees who qualify will need to be working for the company full time and not hold over 30% of company shares.
All of this may sound confusing, especially if you do not experience in EMI share options. When considering such schemes, it is essential that you work with professionals who have experience. You want to ensure that your company and employees are qualified and the right steps are taken to begin the program. This way, both you and your employees benefit in the long run. Find out more today about EMI shares and how you can get started with working with EMI specialists.