For employees: share options explained
We explain how share options work for employees. Vesting, exercise, how much your options might be worth, when to sell y...
An EMI Options Scheme is a tax-advantaged share options scheme provided by HMRC that allows qualifying companies to give share options to employees in a way that avoids the company incurring a tax liability, and greatly reducing the tax liability for the employee.
The EMI Options Scheme is only available to qualifying companies, which means companies that meet the requirements below.
So, before you get started creating your EMI Options Scheme on SeedLegals, check that your company meets all the requirements below. If in doubt hit the chat bubble to talk to our team or book a call with an EMI Options specialist.
Sign up to SeedLegals to set up your EMI Option Scheme now.Â
The Company must carry out a qualifying trade.
Here are some examples of what is not a qualifying trade:
The qualifying activities for EMI Options are basically the same as for SEIS/EIS, so if your company’s primary business is any of the above then you won’t qualify for EMI or SEIS/EIS.
If the company carries on any non-trading activities such as holding investments then it won’t qualify.
The gross assets test often confuses people, it has nothing to do with the valuation in your last funding round, instead it means all the assets which would be shown on the balance sheet, without any deduction in respect of liabilities.
The company must have a permanent establishment in the UK, or, in the case of a parent company, at least one company in the group that is carrying on a qualifying trade must have a permanent establishment in the UK.
A company is under control of another company if the other company has the ability to instruct this company to conduct its affairs in accordance with their wishes, by means of shareholding, possession of voting power or by virtue of powers conferred on it through the company’s Articles or other documents.
A company is not a qualifying company unless all its subsidiaries are also qualifying subsidiaries at the date of grant of the EMI options.
If any of these are true then your company won’t qualify:
The EMI Options Scheme is designed for small and medium size businesses, over 250 employees and you won’t qualify.
Your employees will need to work a minimum of 25 hours per week, or work for your company more than three quarters of their total working time.
You can’t give EMI Options to anyone who owns more than 30% of the shares.
The total value of shares (at the date of grant) which an employee hold cannot exceed £250,000, or that employee won’t qualify for EMI tax relief on their options.
If the total value of shares in the company subject to EMI exceed £3M then the company won’t qualify for EMI tax relief.
If you’re still unsure whether your company qualifies, hit the chat button to talk to one SeedLegals EMI Options experts.
Wondering how much equity you should be giving to your team? Read our recommendations for UK startups or check out our detailed guide on the EMI Options Scheme.
Accountants used to charge thousands for this, SeedLegals uses technology and automation to change that.
‍Set up your EMI Share Option Scheme with SeedLegals now or book a call with a member of the SeedLegals team.