EMI Share Options, a great employee incentive

EMI Share Options are a great way to reward employees right now

 

COVID-19 is forcing businesses to reduce staff costs by furloughing employees, imposing pay cuts or even making redundancies. How can businesses motivate the staff they are retaining in this climate?

EMI (Enterprise Management Incentive) share options have been a very popular tool for motivating staff especially in high-growth companies, because they provide employees with potentially big, longterm shareholder benefits without any cash outflow disadvantage to the company or indeed the employee. They also only aid an employees commitment to a company, because they are 'invested' in the future of the business and will ultimately share in the successes they help make happen.

Now therefore is a great time for employers to review the potential value of EMI options, and consider either starting a scheme to reward loyal employees through this period, or for any firm with an existing scheme it may be worth reviewing things (because whilst the value of a company may have been impacted by COVID-19, this can be advantageous at least from an EMI perspective).

We have more information about EMI in our download which can be accessed by clicking here, and here are two important issues to examine as a consequence of COVID specifically:

  1. EMI options are normally granted at the market value of the company shares, albeit at a heavy discount to the whole company value. This means the employee pays that discounted value when he actually exercises the option and acquires the shares. In most cases this will happen when the company is being sold allowing the employee to sell his shares along with the other shareholders. The virus has had a serious effect on the trading position of many companies with the result that that the market value of the company shares has fallen significantly. This means that new EMI options can granted to the staff at much lower prices than before. That could help soften the blow of pay cuts and provide a positive incentive to appropriate staff. Where staff already have EMI options, exercisable at an earlier and higher market value, these options can be cancelled and replaced by new options at the current lower value.
  2. To get the full value of EMI options, they need to be exercised no more than 10 years after being granted. Some companies may find that the virus has affected their company so badly that the shareholders will need to delay their plans to sell the company by a number of years to allow the business to recover. If this means that EMI option holders may overshoot the 10 years deadline, it may make sense to cancel their options and obtain fresh options. That would allow a further ten years for the exercise of these new options. In addition, it would allow the employees to get the benefit of a lower price for the options.

As we allude to above, in considering these opportunities there are some other matters to be considered, including the likely horizon for a company sale. Should you be interested in reviewing your options for incentivising employees through the use of EMI options, please get in touch with any of the Corporate Tax team or email Stephen Oates directly on S.Oates@frenchduncan.co.uk.

Alternative, you can call to speak to any of the team on 0141 221 2984. We may be working from home, but we’re still fully contactable with access to all our system and processes.

And remember, more information on EMI Share Options can be found in our download guide by clicking here.

Update on EMI and Furlough:

  • There were concerns that employees with EMI options who have been furloughed may no longer qualify for the advantageous tax treatment.  However, HMRC have announced that EMI participants currently on furlough will not lose the EMI tax advantages as a consequence of not technically meeting the EMI working time requirement. This applies to EMI options granted prior to 19 March 2020, and will continue in effect till 5 April 2021.

For all our tips & guidance around COVID-19 / Coronavirus, see: www.frenchduncan.co.uk/covid-19/.

 

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Our Team



Stephen  Oates

Stephen Oates
Tax Director
S.Oates@frenchduncan.co.uk
0131 225 6366

Stephen  Oates

Stephen Oates

Tax Director

BSc(Hons) CTA

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0131 225 6366

S.Oates@frenchduncan.co.uk


Specialisms include...

Stephen began his career working for a short time at HM Revenue & Customs as an Administrative Officer before joining an independent CA practice as a tax assistant dealing with all tax compliance issues and identifying tax planning opportunities. Three years later, he was appointed as tax manager to a mid-tier accountancy practice, where he remained for six years, before joining French Duncan in 2015 in the same role.

Stephen has gained extensive experience of working for both personal and corporate tax clients which helps him give more comprehensive tax advice. Stephen has gained exposure throughout his career to all aspects of Employment taxes and has added to this expertise through completing numerous Employment tax review and due diligence reports. Stephen has also been heavily involved with giving advice, both technical and compliance based, on all aspects of employment related securities which covers both tax advantaged scheme such as EMI, SIP, CSOP and non-tax advantages schemes.

Robert Barrie

Robert Barrie
Corporate Tax Director
r.barrie@frenchduncan.co.uk
0141 221 2984

Robert Barrie

Robert Barrie

Corporate Tax Director

BAcc(Hons) CA

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0141 221 2984

r.barrie@frenchduncan.co.uk


Specialisms include...

Robert started his career at a top 15 accountancy firm, working in both personal and corporate tax, before qualifying as a chartered accountant in 2008.

Robert believes in proactive client engagement and delivering both commercial and tax efficient planning solutions.

In 2012 Robert joined a top 10 accountancy firm, specialising in the provision of business tax advice to SME’s, owner managed businesses and high net worth individuals.

Robert then joined French Duncan in 2014 and has helped to oversee the growth and development of our corporate tax department.

His current role includes advising on a range of projects including corporate restructuring, capital allowance planning, Research and Development claims, due diligence and international tax issues.

Robert also oversees the corporation tax compliance process for a number of our firms largest and most complex clients.

Sharon Kinney

Sharon Kinney
Corporate Tax Senior Manager
s.kinney@frenchduncan.co.uk
01786 451 745

Sharon Kinney

Sharon Kinney

Corporate Tax Senior Manager


01786 451 745

s.kinney@frenchduncan.co.uk


Specialisms include...

Sharon qualified as a Certified Accountant in 1992 whilst training with a small accountancy practice in Glasgow. She started her career in general practice working in all areas including accounts preparation, audit, personal tax, corporate tax and insolvency before specialising in corporate taxation.

Prior to joining French Duncan in 2015, Sharon worked in a top 10 accountancy practice as a senior tax manager specialising in corporate taxation. She has also worked in mid-tier practices and was a corporate tax manager in a Big 4 firm.

She has gained experience in dealing with clients in various industries and of varying sizes of businesses from sole trader to large groups and in her current role overseas the corporate tax compliance for the firm as well as providing business tax advisory services.

As part of her role Sharon overseas the tax compliance and advice for the various clubs, CASCs, mutual societies and charities which the firm represents. This includes working closely with clients and members of the corporate tax team to ensure that the basis on which the work is carried out is in line with current tax guidance, which can be complex at times.

She believes that the advice and work we carry out for clients should be relevant, proactive and delivered in a timely manner and is provided in a format that the client is able to follow which she also instils in her team.

Barry  Laurie

Barry Laurie
Partner
b.laurie@frenchduncan.co.uk
0131 225 6366

Barry  Laurie

Barry Laurie

Partner

BSc CA

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0131 225 6366

b.laurie@frenchduncan.co.uk


Specialisms include...

Throughout his extensive career, Barry has worked for HMRC, Arthur Andersen, Coopers and Lybrand and McCabes. He has been a Tax Partner with French Duncan since its merger with McCabes in 2008.

Barry has a wealth of experience in all aspects of tax matters, from corporate to personal and has a particular specialism in maximising capital allowances for clients. Whilst Barry can advise any business on its tax matters, he has particular expertise in the hospitality and property sectors.

He can also advise on tax incentives for investment.

Barry prides himself on taking the initiative to understand his clients’ needs to deliver results.

He enjoys building strong relationships with his clients and continually seeks opportunities which he believes will be to their benefit.

Stephen  Thom

Stephen Thom
Partner & Head of Corporate Tax
s.thom@frenchduncan.co.uk
0141 221 2984

Stephen  Thom

Stephen Thom

Partner & Head of Corporate Tax

ACA

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0141 221 2984

s.thom@frenchduncan.co.uk


Specialisms include...

Stephen is an experienced tax advisor who has worked in both practice and industry roles during his career. He started his career in London with BDO prior to working with Lloyds Banking Group for three years, where he specialised in providing tax advisory services. Stephen joined French Duncan as a tax director in 2015 from a mid-tier firm in Glasgow and became a Partner in May 2017.

He specialises in advising on a variety of corporation tax matters, including: share reorganisations; group restructuring advice; substantial shareholdings exemption; the taxation of loan relationships and international tax advice. Stephen has gained experience through advising a wide variety of clients, ranging from owner managed businesses to AIM and fully-listed enterprises.

He has developed a reputation for fully understanding the commercial objectives and strategies of businesses prior to providing tax advice, in the process ensuring that the tax outcome is always aligned to the wider business objectives.

John Cairns

John Cairns
Partner
j.cairns@frenchduncan.co.uk
0141 221 2984

John Cairns

John Cairns

Partner

BA CA ATII

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0141 221 2984

j.cairns@frenchduncan.co.uk


Specialisms include...

John trained with McLachlan & Brown before joining Price Waterhouse at the start of the 1980s as a tax senior. He moved to Arthur Andersen & Company in the same capacity two years later, before his appointment as a tax manager and, subsequently, tax partner at a constituent firm of Scott Moncrieff, where he remained for some 21 years. John was appointed head of tax in Scotland for BDO in 2006, joining French Duncan as a partner in 2014.

He specialises in advising owner-managed businesses and their owners on a wide range of tax matters, including: acquisitions and sales; reorganisations; share valuations; succession planning; shares schemes; tax efficient investments and inheritance tax planning. John has also advised charitable and not-for-profit organisations and has prepared expert witness reports covering a range of issues.

He has established a reputation amongst his clients as a tax expert who can make often complex matters readily understandable to the benefit of themselves and their businesses.

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