On 15 May 2018 the European Commission renewed state aid approval for Enterprise Management Incentive plans.
The previous approval expired on 6 April 2018. HMRC published a bulletin on 4 April 2018 here warning that options granted in the intervening period may not qualify for tax relief. The announcement prompted some debate as to whether that position was over-cautions particularly as the need for State Aid Approval seems to have been overlooked during the first 9 years after EMI was introduced!
The lingering question is now whether options granted in the gap between 6 April and 15 May 2018 will qualify for tax relief. Neither the Commission nor HMRC have formally confirmed the approval is retrospective but the better view seems be options will qualify because all the Commission are required to decide is whether to raise any objections on state aid grounds (not whether the arrangements are "approved" as such). The Commission concluded the prolongation of the tax reliefs is necessary to help UK small and medium sized enterprises attract and retain talented and skilled personnel. It also found the legislation contains several safeguards (such as the cap on the value of share options) that ensure the potential distortions on competition are limited. The formal decision letter should be published in the next few days and can be accessed through the public case register under case number SA47789.
The Bird & Bird incentives team in the UK have acted for many private companies (particularly in the technology and media space) for whom EMI is an essential plan for attracting talent in the run-up to exit. Indeed we believe the team acted on the largest ever EMI plan (in terms of the tax savings achieved) to date. The plan represented 25% of the total cost of EMI plans to the exchequer for the year our client (in the media sector) exited achieving income tax savings alone of £40 million.
For more guidance on these very tax efficient and flexible plans click here.
Please click here for more information on Bird & Bird's International Employee Incentives and Benefits practice.