--- title: "Does your company qualify for an EMI Share Option Scheme?" id: "1829" type: "post" slug: "company-qualifies-emi-share-option-scheme" published_at: "2019-02-22T11:12:36+00:00" modified_at: "2026-03-31T12:17:08+00:00" url: "https://seedlegals.com/resources/company-qualifies-emi-share-option-scheme/" markdown_url: "https://seedlegals.com/resources/company-qualifies-emi-share-option-scheme.md" excerpt: "A detailed guide to EMI Share option scheme qualifying criteria for companies and employees, plus other ways to give share options if you don’t qualify for EMI." taxonomy_category: - "Option Schemes" --- 6 min read Expert reviewed This article has been fact-checked by a SeedLegals subject matter expert. [Meet our experts](https://seedlegals.com/authors-and-experts/) and learn more about our review process and quality assurance in our [editorial policy](https://seedlegals.com/editorial-policy/) . # Does your company qualify for an EMI Share Option Scheme? Published: Feb 22, 2019 Updated: Mar 31, 2026 Contents [EMI share option schemes qualifying criteria: for companies](#emi-share-option-schemes-qualifying-criteria-for-companies) [EMI share option schemes qualifying criteria: for employees](#emi-share-option-schemes-qualifying-criteria-for-employees) [What to do if you don’t qualify for EMI](#what-to-do-if-you-dont-qualify-for-emi) [Useful resources: share options](#useful-resources-share-options) [Talk to an expert](#talk-to-an-expert) [Copywriter Kaylin Sullivan Senior Copywriter](https://seedlegals.com/resources/author/kaylin/) [Expert Contributor Anthony Rose Co-Founder and CEO](https://seedlegals.com/resources/author/anthony/) [Expert Contributor Ria Sangal Options Associate](https://seedlegals.com/resources/author/ria-sangal/) Want to attract and motivate top employees? EMI share options are the way to go. An EMI share option scheme is a way to distribute tax-advantaged share options to full-time employees. Because EMI share options get such favourable tax treatment, they’re the preferred way for companies to grant equity to employees, and give them a personal stake in the company they’re helping to build. If you want to learn more about share option schemes, beyond just the qualifying criteria, read [Share options explained: the essential guide for UK startups](https://seedlegals.com/resources/share-options-explained/) In this article, we’ll cover what the EMI scheme qualifying criteria are for your company and employees. **Contents:** - [EMI Share option schemes qualifying criteria: for companies](#qualifying-criteria-companies) - [EMI Share option schemes qualifying criteria: for employees](#qualifying-criteria-employees) - [What to do if you don’t qualify for EMI](#what-to-do-if-you-dont-qualify) - [Useful resources about share option schemes](#useful-resources) - [Talk to an expert](#talk-to-an-expert) ### The easy way to run your EMI scheme We make it fast, easy and affordable to create and run an EMI scheme. Create documents in just a few clicks. [Tell me how](https://seedlegals.com/grow/share-options-scheme/emi-option-schemes/) ## EMI share option schemes qualifying criteria: for companies ### 1. Your company must not carry out an excluded trade Your company won’t qualify for EMI if you carry out one or more of the following excluded trading activities: - Dealing in goods that aren’t an ordinary trade of wholesale or retail distribution - Dealing in land, commodities, futures, shares, securities or other financial instruments - Banking, insurance, money-lending, debt-factoring, hire purchase financing or other financial activities - Leasing (including letting ships on charter, or letting other assets on hire) or receiving royalties or other licence fees - Legal or accountancy services - Property development - Farming or market gardening - Holding, managing or occupying woodlands, any other forestry activities or timber production - Shipbuilding, producing coal or producing steel - Operating or managing hotels or comparable establishments, such as a guest house or hostel, or managing property used as a hotel or comparable establishment Source: [Gov.uk Employee Tax-advantaged Share Scheme User Manual](https://www.gov.uk/hmrc-internal-manuals/employee-tax-advantaged-share-scheme-user-manual/etassum52100) ### 2. Your company must be established in the UK To qualify as a UK establishment, your company must have either: - A physical place of business in the UK, or - An agent who acts on your company’s behalf in the UK If the company granting share options is a parent company, at least one company in the group must have a permanent establishment in the UK. Find out more about how HMRC defines ‘permanent establishment’ in the [International Manual](https://www.gov.uk/hmrc-internal-manuals/international-manual/intm264050) . ### 3. Your company must have fewer than 500 full-time employees If your option grant was made before 6 April 2026, this limit was 250 full-time members of staff. A full-time employee works a minimum of 25 hours per week or, if less, then 75% of their working time. You can find more details on this in [HMRC’s Employee Tax Advantaged Share Scheme User Manual](https://www.gov.uk/hmrc-internal-manuals/employee-tax-advantaged-share-scheme-user-manual/etassum53020) . ### 4. Your company must have less than £120 million in gross assets Your assets include all the assets which would be shown on the balance sheets (before any deductions). This figure was £30m before 6 April 2026. If your company is part of a group, the gross assets limit applies to the collective gross assets of the entire group. If you want to dive deeper into this topic, you can [read HMRC’s guidance on gross assets](https://www.gov.uk/government/publications/statement-of-practice-2-2006/statement-of-practice-2-2006#eel-11) . We also recommend you speak to an accountant to understand how to calculate the gross assets of your company. ### See what other startups’ schemes look like Want to know how other UK startups are running their share option schemes? Download our 2025 report to find out. [Download the report](https://seedlegals.com/reports/share-options-report/) ### 5. Your company must not be controlled by another company Your company won’t be eligible for EMI if it’s controlled by another company. This means another company has the ability to instruct you to conduct your business according to their wishes by means of shareholding or voting power. If another company holds more than 50% of your company’s shares then your company is considered as being controlled by that company. ### 6. If your company has subsidiaries, they must be qualifying subsidiaries A company is not a qualifying company unless all its subsidiaries are also qualifying subsidiaries at the date when the EMI options are granted. If any of these are true, then your company won’t qualify: 🏢The subsidiary is less than 51% subsidiary of the holding company 🤵Some other person or company has control of the subsidiary ❌There are arrangements in place under which these conditions would cease to be met Source: [Employee Tax Advantaged Share Scheme User Manual](https://www.gov.uk/hmrc-internal-manuals/employee-tax-advantaged-share-scheme-user-manual/etassum52040) ### 7. The company must have allocated less than £6 million in EMI share options You can only give out EMI options up to the value of £6 million (this figure was £3m before 6 April 2026). Any share options you give out over this amount won’t qualify for EMI tax relief. This is an important point to watch out for because it can creep up on you gradually. One day you might allocate an employee their share options, and realise your existing EMI options now equate to over £6M in shares (the limit was £3m before 6 April 2026), and you’re no longer able to offer EMI options to new employees. You can still offer them options without EMI tax advantages, of course – but that can be expensive for both the company and the employee. Source: [HMRC Employee Tax Advantaged Share Scheme User Manual](https://www.gov.uk/hmrc-internal-manuals/employee-tax-advantaged-share-scheme-user-manual/etassum51060) > A Company can only issue up to £6 million in unexercised EMI options (the limit was £3m before 6 April 2026). This is calculated by the number of unexercised EMI options multiplied by the UMV (unrestricted market value) you agreed with HMRC at the time of the grant. > > This number is different to the total value of the shares in the company and it doesn’t include unexercised Unapproved options. > > If the company goes over the £6 million limit (the limit was £3m before 6 April 2026), the excess is still a valid option grant but the excess won’t be eligible for the tax benefits. > > [Ria Sangal](https://seedlegals.com/resources/author/ria-sangal/) > Share options expert, > > [SeedLegals](https://seedlegals.com) > > - [https://www.linkedin.com/in/ria-sangal-026b75160/](https://www.linkedin.com/in/ria-sangal-026b75160/) ### EMI scheme checklist This simple step-by-step guides you through how to set up your EMI share option scheme. [Download the checklist](https://seedlegals.com/checklists/checklist-emi-share-option-schemes/) ## EMI share option schemes qualifying criteria: for employees To grant EMI share options, both your company and employees must be eligible. An employee is eligible to receive tax-advantaged EMI share options if: ✅they are a legal employee or director on your PAYE payroll ✅they work at least 25 hours a week or 75% of their weekly working time ✅the total market value of the options they hold doesn’t exceed £250,000 ✅they don’t have a material interest in the company According to HMRC, an employee is considered to have a ‘material interest’ in the company if: - the employee has beneficial ownership of, or the ability to control directly or indirectly, more than 30% of the ordinary share capital of the company, or - if the company is a close company, the employee has, or is entitled to, acquire rights that would give 30% of the company assets to the employee to distribute among participators if the company were to be wound up Source: [Employee Tax Advantaged Share Scheme User Manual](https://www.gov.uk/hmrc-internal-manuals/employee-tax-advantaged-share-scheme-user-manual/etassum53040) **A close company** is a company that’s controlled by five or fewer ‘participators’ (ie shareholders) or if all the shareholders in the company are directors. See [HMRC Company Taxation Manual](https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm60060) for more information. 🎁**Giving EMI options to your employees?** Share this guide with them to help them understand the scheme: [For employees: share options explained.](https://seedlegals.com/resources/employee-share-options-explained/) ## What to do if you don’t qualify for EMI Don’t worry, there are other ways to reward your team with equity if you or your team members don’t qualify for EMI. > You don’t need to have an option scheme to offer share options. > > When you hire people, you can create an [Employment Agreement](https://seedlegals.com/start/team-agreements/employment-agreement/) > on SeedLegals, including terms that promise them share options. Then, when you’re ready, you can[create your option scheme on SeedLegals](https://seedlegals.com/grow/share-options-scheme/) > . > > You can do the same for freelancers, consultants and advisors – for them, use our [Consultancy Agreement](https://seedlegals.com/start/team-agreements/consultancy-agreement/) > or [Advisor Agreement](https://seedlegals.com/start/team-agreements/advisor-agreement/) > . > > [Anthony Rose](https://seedlegals.com/resources/author/anthony/) > CEO & co-founder, > > [SeedLegals](https://seedlegals.com) > > - [https://www.linkedin.com/in/anrose/](https://www.linkedin.com/in/anrose/) ### **Unapproved share options scheme** This scheme is for everyone the EMI scheme doesn’t cover and for companies that aren’t eligible for an EMI scheme. An [Unapproved scheme](https://seedlegals.com/grow/share-options-scheme/unapproved/) is perfect for giving options to freelancers, contractors, advisors or employees abroad – we explain more in [How to give share options to overseas employees](https://seedlegals.com/resources/give-share-options-to-overseas-employees/) . **Did you know?** ‘Unapproved’ doesn't mean 'not allowed' - it's the term we use for schemes that aren’t officially signed off by HMRC and are largely unregulated. These schemes don't have the same generous tax benefits, but they're definitely allowed and used by thousands of companies. A lot of companies have both an EMI scheme and an Unapproved scheme. To find out which is best for you, read our article [EMI or Unapproved share option scheme – Which is best?](https://seedlegals.com/resources/emi-or-unapproved-share-option-scheme-which-is-best-for-you/) ### Unapproved share option schemes made easy Create and run your Unapproved share option scheme - the fast and affordable way. [Tell me how](https://seedlegals.com/grow/share-options-scheme/unapproved/) ### **Growth shares** Companies that don’t qualify for an EMI scheme could consider growth shares. This type of share only has a value when the company’s share price goes over a certain amount. Growth shares are a way to incentivise employees with equity either outside an existing option scheme or separately from your option scheme. 📈Read more in our post: [Growth shares: what are they and should you issue them?](https://seedlegals.com/resources/growth-shares/) ## Useful resources: share options We’ve got a library of resources to help you understand and run share option schemes. Here are our top picks for you: ✅[Free checklist: EMI option schemes](https://seedlegals.com/checklists/checklist-emi-share-option-schemes/) – a simple step-by-step guide on how to set up an EMI scheme. Tick off the to do’s as you go. 📖[Free ebook: The founder’s guide to share option schemes](https://seedlegals.com/ebooks/share-options-guide/) – a comprehensive guide to share option schemes 📄[Articles](https://seedlegals.com/resources/category/share-option-schemes/) – browse all the options articles in our resource centre ## Talk to an expert Need some more clarity on whether you qualify for EMI? Need guidance on which scheme to go for? We’re here to help. Book a free 30-minute call with one of our experts. - Article Sources 1. [gov.uk| Employee Tax Advantaged Share Scheme Manuel](https://www.gov.uk/hmrc-internal-manuals/employee-tax-advantaged-share-scheme-user-manual/etassum50000) – Accessed 1 September 2023 ## Related posts [11 min read Share options explained: the essential guide for UK startups Want to offer your team equity in your company? Our guide covers the facts about share options: how and when to set up a... Kaylin Sullivan](https://seedlegals.com/resources/share-options-explained/) [4 min read How to give share options to your overseas employees Want to reward your overseas employees with share options but don’t know how? We explain how UK companies can give share... Anthony Rose](https://seedlegals.com/resources/give-share-options-to-overseas-employees/) [6 min read 409A valuation: what it is and when you need one To give shares or options to your US taxpaying employees, you need to first establish the fair market value (FMV) of the... 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