Enterprise Management Incentives – working time requirements

The measure

The Enterprise Management Incentive (EMI) scheme is a tax advantaged plan under which small and medium sized enterprises (SMEs) can grant tax efficient share options to employees in the UK. There are a number of conditions which must be satisfied in order for EMI options to be granted, one of which relates to the amount of time an employee works for the company (or a company in the relevant group). Where an employee’s working time falls below the relevant threshold, any EMI options already granted could lose some of their tax advantages and the employees concerned would ordinarily cease to be eligible to receive further EMI options.

Legislation was introduced in 2020/21, the effect of which was to allow employees who are furloughed or who have their working hours reduced below the current statutory working time requirement for EMIs as a result of COVID-19 to retain access to the scheme’s tax advantages. The government has now confirmed that this legislation will be extended to the 2021/22 tax year and will apply both to existing participants of EMI schemes and in circumstances where new EMI share options are being granted. 

Who will be affected?

Participants in EMIs who have their working hours reduced because of COVID-19.

When will the measure come into effect?

The measure will have effect until 5 April 2022 i.e. the end of the 2021/22 tax year.