Are you looking to reward your employees in a tax efficient and compliant way? Do you need to retain key staff to succeed in your business?What are EMIs?
Employees will not normally pay income tax on the grant of EMI options, instead 10% capital gains tax is payable on the increase in the value of the option shares (the option ‘exercise price’). The tax savings on setting up an EMI scheme are huge, alternative forms of remuneration would typically attract tax rates as high as 40%.
EMI options are typically of two types, those driven by an:
|Exit strategy||OR||A non-exit strategy|
Under an exit strategy a business owner is typically looking to sell their business, but wants to ensure that they retain key staff. It's
not uncommon for a business sale to take a couple of years, i.e. the lead time taken to find a buyer and for the sale to complete.
The ultimate goal is to encourage key employees to work towards the same
end goal as the owner, employees are then rewarded as they can exercise their options and make a profit on the increase in value, when the business is sold.
Owners who are not looking to sell their business but still want to retain key staff will go for non-exit EMIs. It is common to build in performance conditions whereby staff have to meet certain targets before they are able to exercise their options.Which businesses qualify
✓ Gross assets of the company must not exceed £30m
✓ Company must have less than 250 employees
✓ It must be an independent trading company
✓ Some trades do not qualify, e.g. farming, shipbuilding
For a simple EMI scheme for 5 or fewer employees we charge a fixed fee of £3,000 plus VAT - our work will cover:
✓ Review of your Articles of Association to assess conformance with the scheme
✓ We will prepare a proposed valuation, which we will agree with HMRC
✓ We will prepare the EMI option agreement
✓ We will prepare the board minutes for approval of the scheme
✓ We will register the scheme with HMRC
For an additional annual fee of £249 plus VAT, we can file your annual return with HMRC. The return covers each tax year and is due by 6 July following the April tax year end.
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