Expiry of State Aid Approval for EMI Schemes
HMRC has made the following announcement, which has come entirely out of the blue to all:
"Companies and advisers concerned with the grant of EMI share options
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. Anyone with existing EMI share options will not be affected. Any schemes put in place before 6 April 2018 will not be affected.
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.
Companies may wish to consider delaying the grant of employee share options intended to qualify as EMI share options until fresh EU State Aid approval has been given.
HMRC will continue to apply its current guidance and practice, in relation to employment-related securities options validly granted as EMI share options before 6 April".
You will see from this that it would be sensible for companies to defer the grant of any EMI options until such time as the government has secured fresh EU State Aid approval from Brussels.
If there is some compelling commercial reason why a company needs to grant employee share options after 6th April 2018, and before such time when fresh EU State Aid approval has been received, and such options would otherwise be expected to qualify as EMI share options, careful consideration needs to be given to the terms on which they are granted so that, if necessary, it will be open to the parties to cancel and re-grant such options at a time when they will qualify for the tax reliefs associated with EMI share options.
If you would like to discuss this matter further, please contact:
Partner – Head of Tax
direct dial: 01942 292541
mobile: 07790 840394
direct dial: 01942 292505
mobile: 07730 436070