Other tax reliefs for fast-growth businesses include the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS).
The EMI scheme was introduced in 2000 and has since become a favourable option for employees and employers alike. Companies can grant employees share options of up to £250,000 in a 3-year period with no cash cost to the employee.
The EMI scheme provides employers and employees with generous tax breaks, incentivising employees to work hard to invest and make the business a success and allowing employers to retain talented employees.
Employees are given the right to buy shares in the company at the price it is valued at when offered the option. This gives employees the chance to make a hefty profit in the future if the value of the company increases.
Employees will not have to pay National Insurance or Income Tax on the shares if bought for the market value they had when granted the option. If you paid less than what it was valued for at the time, National Insurance and Income Tax will have to be paid on the difference.
If you make a profit (gain) when you sell (dispose of) shares or investments, you may have to pay Capital Gains Tax. This is applicable for:
Paying tax will depend on whether your total gains are above the Capital Gains Tax allowance for the tax year.
There are various conditions to be met for both the company and employee to qualify for the EMI scheme. The company must:
Companies will not qualify if they work in excluded activities. These include:
Employees will qualify for the scheme if:
The above are general conditions relating to the Enterprise Management Scheme (EMI) and each company should be reviewed on a case by case basis.
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