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By LegalEdge News

10 EMI Mistakes to Avoid

Enterprise Management Incentive (EMI) share options were introduced for SMEs in 2000, offering companies a great way to attract and retain employees.  Rewards received through EMI options are not subject to income tax and National Insurance but instead are taxed as capital gains, which under current tax rules means a tax rate of 20% and in many cases 10%. (See below for more detail on What is EMI?).

All sounds great, right?

But as with any new endeavour, there are some things you need to be mindful of.

So, if you’re thinking of creating an EMI for your company, Postlethwaite Solicitors (specialists in employee ownership and share schemes) highlight 10 common mistakes to watch out for and to avoid….

10 Mistakes to Avoid:

1. Failure to register EMI options correctly

2. Option scheme not managed properly / annual returns not completed correctly

3. Promise to employees not satisfied

4. No discretion for board on leavers

5. Make sure your company and employees are eligible for EMI

6. Failure to get HMRC approval on the share value

7. Keep a close eye on the financial limits

8. Restrictions affecting option shares must be clearly spelt out to option holders

9. Locking in option holders after a sale of the company

10. Dealing with uncertain sale value e.g. earnouts

We work closely with Postlethwaite’s and others to help you navigate and plan for all these potential hazards when creating and setting up your EMI option scheme. If you would like to discuss any of these issues or would like further legal advice on employee share schemes get in touch on

What is EMI?

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