EMI share scheme for small business
Tax efficient rewards for your employees
We specialize in creating a tax-efficient EMI Scheme tailored to suit your business needs and facilitate growth.
Our services include handling all interactions with HMRC, submitting necessary paperwork, and making any necessary adjustments along the way.
Enterprise Management Incentives (EMI) scheme
EMI is an ideal choice for companies seeking to motivate, retain, and attract talent without the need for higher salaries offered by larger firms.
The HM Revenue and Customs (HMRC) has approved EMI as a highly efficient and flexible plan for share options. Taxes can be handled by selling or transferring convertible assets. EMI options are granted free of income tax and only become subject to a 10% capital gains tax upon sale.
We can assist you in establishing an EMI share scheme, which is the most tax-efficient method for granting stock options to both employees and the company. Our team of Telford accountants is ready to support you.
Additionally, you have the option to invite us to join your platform. By doing so, we can securely retrieve and store essential documents from your own vault.
We are also pleased to offer a 10% introductory discount to clients who sign up with us and our partner Vestd on their share scheme digital platform.
What is an EMI scheme (government‑backed share options)?
EMI provides a straightforward, customizable, and tax-effective method to grant equity to your team. Its purpose is to aid the growth of small businesses and enhance their competitiveness in talent retention and recruitment. By implementing an EMI scheme, you can offset the expenses and tax advantages obtained by your employees against your company’s tax liability.
For 80% of scaleups, startups, and small to medium-sized businesses, EMI is the preferred choice. It represents the most tax-efficient approach to granting shares to employees, benefiting both the business and the recipients.
While EMI is often the optimal solution, there are alternative options for distributing stock, such as growth shares, unapproved options, and ordinary shares. Let’s explore the key distinctions among these four types of schemes and examine their potential applications.
The advantages and disadvantages of
the four primary share schemes
Introducing our partner Vestd
Vestd is the leading digital share scheme platform in the UK, offering regulated services exclusively for SMEs. It assists numerous small businesses in designing tax-efficient schemes, simplifying the process of distributing and digitally managing equity.
With Vestd, you can rely on the platform to generate initial and annual notifications to HMRC, and we can provide guidance on the deadlines for these notifications. It also serves as an ideal platform for extracting essential information effortlessly, enabling seamless integration with HMRC (and Company House) as your tax deadline approaches. This integration ensures a smooth audit process and guarantees compliance.
Furthermore, Vestd allows you to utilize your own prepared documents or choose from standard templates to initiate the process easily.
Does your business qualify for an EMI scheme?
A business will usually qualify for an EMI if it meets the following requirements:
- Up to 249 employees.
- £30m or less in assets.
- Is not majority-owned or controlled by another company.
- Not one of the excluded industries, including banking, farming, property development, legal services, shipbuilding, or leasing,
Many start-ups and scaleups – and most established SMEs – will meet these eligibility requirements.
If your company doesn’t, then one of the other ways of distributing equity will be a better fit.
A platform built for performance
If your main objective in implementing an EMI scheme is to inspire and incentivize your team, this option could be suitable for you. Every member of your team will have access to their individual recipient’s portal, which will provide a transparent summary of the current worth of their shares. It will also allow them to estimate the potential value of their assets in case the company shares appreciate. This serves as a powerful motivation for your business!
How to make EMI share schemes work for you
Founders, CEOs, and CFOs use the platform to take the hassle out of managing share schemes:
Start-ups:
You have the opportunity to provide co-founders and key initial hires with a share of the rewards.
Growth companies:
An EMI share scheme can attract and retain top talent to achieve your goals.
Scale ups:
Go digital to save time. Minimize the effort required to add and remove people from your scheme.
Mature companies:
Show appreciation to your devoted staff members by granting them a share of the success.
VCs and investors:
Keep tabs on vital portfolio activity and instantly access both current and historical cap tables.
The tax implications of an EMI scheme
Businesses that provide EMI options can receive Corporation Tax relief if employees acquire eligible shares through exercising an EMI option. This relief generally amounts to the difference between the price paid by the employee for the shares and their value upon exercising the options.
Employees who receive EMI option grants can qualify for Entrepreneurs’ Relief upon selling the shares. To be eligible for this tax benefit, the options or shares must be held for a minimum of 24 months from the grant date.
If a disqualifying event occurs, causing your company, an employee, or the options scheme to no longer meet the qualifying criteria, the options will lose their tax advantage unless they are exercised within 90 days of the event.
What does the EMI scheme setup process look like?
Why Choose us?
We have assisted numerous business owners in optimizing their equity by utilizing our digital share scheme platform designed for startups, scale-ups, and SMEs. This platform offers a straightforward method to reward employees who contribute to the company’s growth.
By partnering with Tacellent Accountants in Telford and utilizing our EMI scheme, the process of distributing shares becomes effortless. Implementing an EMI scheme not only simplifies the share distribution but also helps reduce your company’s tax liability by offsetting employee tax benefits.
Bid farewell to cumbersome paperwork with our streamlined solution!
Day to day management of your scheme
You will be required to update your capitalization table in order to accurately represent the current options that have been issued, as well as make any necessary changes to the beneficiaries of the Enterprise Management Incentive (EMI) scheme. Our team of professionals will always be available to support you in creating and maintaining your scheme, making the process much more convenient for you.
Here’s what we can offer:
- Assist you in setting up and initiating your scheme.
- Manage the members of your EMI scheme.
- Digitally handle all aspects of the scheme.
- Enable digital exercise of options.
- Facilitate Companies House notifications.
- Execute your scheme efficiently.
- Provide valuations.
- Benefit from flexible vesting schedules.
- Customize vesting schedules according to your requirements.
Post-setup activities
Once the initial setup phase is finished, there are several tasks that need to be completed. You have the option to manage these activities yourself through the app, unless otherwise specified.
Here are the activities you can handle:
- Perform self-managed activities through the app.
And here are the activities that will be handled by our EMI scheme partner:
- Manage activities related to the EMI scheme.
What the platform also offers
- Instantly issue shares and options.
- Efficiently generate new option schemes.
- Obtain shareholder approval digitally.
- Access a real-time capitalization table that is 100% accurate.
- Ensure Companies House is constantly updated.
- Analyze and simulate future scenarios such as funding rounds and exits.
Main advantages for founders:
- The continual availability of experts specialized in equity matters.
- Assistance in designing and establishing schemes with expert guidance.
- Provision of legal documents, if required.
- Availability of an in-house valuations team, if necessary
- Exclusive integration with Companies House, setting our platform apart Superior, top-rated support.
FAQs
How do employees qualify for an EMI scheme?
- A minimum of 25 hours per week or 75% of their total working time must be devoted to their role as a company employee.
- Their ownership of the company’s shares cannot exceed 30%.
- The value of options granted to them cannot exceed £250,000 at the time of grant.
How many shares should I give to people?
- A minimum of 25 hours per week or 75% of their total working time must be devoted to their role as a company employee.
- Their ownership of the company’s shares cannot exceed 30%.
- The value of options granted to them cannot exceed £250,000 at the time of grant.
What is a vesting schedule?
Once you grant options to employees, they don’t become immediately accessible. Rather, these options undergo a “vesting” period and gradually become accessible to employees over time, typically after twelve months or a longer duration.
When can my team access their shares?
Immediate grants of actual shares are provided, while certain options are subject to vesting, which occurs in two distinct variations: exercisable and exit-only. Exercisable options necessitate a vesting timeline and/or achievement of performance milestones, enabling team members to exercise them once fully vested. Exit-based options, on the other hand, can be exercised upon your company’s sale or restructuring. Vesting and performance milestones can also be applied to exit-based options.
What kind of conditions can I set?
Certain schemes can be contingent, and you have the authority to determine the conditions. Typically, options schemes are structured around time-based vesting spanning several years, but you also have the flexibility to establish performance milestones. EMI option schemes serve as an ideal framework for granting conditional equity rewards.
How should I price my shares?
The approach to equity distribution (such as actual shares, growth shares, or options) determines the considerations involved, including tax implications for each method.
With EMI options, employees can exercise them at either the nominal value or an agreed-upon actual market value. The former is subject to income tax, while the latter is not. Understanding all these details can be overwhelming, so feel free to schedule a no-obligation call with one of our experts using the provided link. When you make the call, be sure to mention the “Vestd EMI scheme.”
What happens if someone leaves?
As a business owner, you have sufficient safeguards in place to mitigate risks in case of an individual’s departure or failure to meet expectations, as long as the appropriate conditions are established.
Nonetheless, it is crucial for the equity to have the intended impact and serve as a motivating factor. This implies that the recipient must also perceive the criteria as fair.
How do I manage an EMI option scheme?
Over time, it becomes necessary to oversee your EMI scheme by incorporating new recipients, removing existing recipients, and maintaining an updated cap table that accurately represents the current issued options. Additionally, you will need to inform HMRC of any modifications, such as the issuance of new options, employee departures, or changes in company ownership (such as a buyout or transfer).