EMI Schemes – Reduce Tax Bills, Increase Employee Retention

Giving your employees company shares as a reward or incentive is a cost-cutting measure which also emboldens the relationship with the participant. EMI schemes were introduced in 2000 to provide smaller companies some impetus.

Some of the biggest benefits of EMI schemes are that they draw your best employees closer to the company vision. It is an exercise of trust and EMI schemes increase the loyalty factor.  In an age of competition, scouts from competing businesses are on a constant lookout for the best talents.

If you have identified the individuals who have potential or have helped the company grow, you have a better chance to hold on to them by making them shareholders.

EMI options scheme – the basics
As an employer, if you are thinking of adding an EMI options scheme there are certain boxes that need to be ticked.

Are your company assets worth 30 million pounds or less?
Does your company employ less than 250 full time employees?
Is it physically established in the UK?

For an employee to be eligible for the EMI scheme, he or she has to be employed full time – which according to labour laws in the UK is calculated as at least 25 hours per week. The tax benefits of EMI schemes are attracting hundreds of companies across the UK. Employees do not have to pay income tax or national insurance on the profits they make on an EMI share. They only have to pay Capital Gains tax. Employees can earn thousands of pounds more without any extra effort just by opting for an EMI scheme.It is always recommended that companies apply for an EMI scheme early.

This is because while the company is still small, HMRC will evaluate the company shares at a low rate. Cheaper company shares allow for more exponential profits and they also result in lesser taxes. Taxes paid on shares are calculated on the nominal base price at which the option was granted. As your company grows, HMRC will evaluate a higher share cost.

EMI schemes are flexible. There are many options the employer can choose to suit the business requirements. Business owners and employers can choose the eligible employees and also add performance criteria.

They can decide the number of options to be granted.Business owners interested in introducing an EMI option scheme should first reach out to the third-party experts. These experts will evaluate the company’s market position and help structure an EMI scheme that is compatible with the organization.

An important service provided by EMI professionals is the communication with HMRC, including all the paperwork submission and negotiating a fair and low price for the EMI share options.EMI schemes are helping young and small companies create wealth for employees while holding on to their best talent.

If your business serves the criteria to set up such a scheme, consider it. Reach out to expert accountants who will share more details on how you can leverage this innovative approach to incentives.