Government consults on extension of enterprise management incentives

The government has announced a consultation into possible expansion of the enterprise management incentives (EMI) scheme to ensure it provides support for high-growth companies

The consultation is considering whether there is support for an extension of the scheme to support innovative companies to recruit and retain the best talent so they can scale up effectively, and examines whether more companies should be able to access the scheme.

The Enterprise Management Incentives (EMI) scheme is a tax-advantaged employee share scheme which offers employees share options and means cash-constrained small employers can offer more attractive remuneration packages, helping them recruit and retain skilled employees.

In 2018-19, around 34,000 employees were granted EMI share options and 8,000 employees exercised share options, and around 12,400 companies had an EMI scheme in place.

An employer may grant qualifying share options up to a value of £250,000 per employee in a three-year period. The total market value of unexercised qualifying share options a company may grant under EMI cannot exceed £3m.

To qualify for EMI, a company must, at the relevant time, have less than £30m in gross assets, fewer than 250 full-time employees and carry out a qualifying trade.

The government is seeking views on whether the current scheme is fulfilling its policy objectives of helping small and medium enterprises (SMEs) recruit and retain employees, whether companies that are ineligible for the EMI scheme because they have grown beyond the current qualification limits are experiencing structural difficulties (ie, in the labour market) when recruiting and retaining employees.

One of the key issues is whether the government should expand the EMI scheme to support high-growth companies and how, and whether other forms of remunerations could provide similar benefits for retention and recruitment as EMI for high-growth companies.

The consultation is also seeking views on whether the current EMI scheme criteria have a distorting effect on companies’ growth insofar as the companies try to remain within the scheme’s limits, and whether widening the current eligibility criteria to support larger companies would affect smaller companies’ ability to recruit and retain employees.

The closing date for comment is 26 May 2021.

HM Treasury consultation, Enterprise Management Incentives: Call for Evidence

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