HMRC has finally published its long-awaited policy on the impact of COVID-19 on the working-time requirement for Enterprise Management Incentive (EMI) schemes following its previous announcement in respect of Company Share Option Plans (CSOP). You can read our earlier views in a previous article here
EMI participants must meet a minimum commitment of 25 hours working time per week or 75% of working time to qualify for EMI. If the participant does not meet this requirement throughout the time they hold the EMI option, the option will be subject to a “disqualifying event” and lose the beneficial EMI tax treatment if the options are then not exercised within 90 days. As a result of being furloughed (or otherwise reducing their working hours) due to COVID-19, a number of EMI option holders would have therefore ceased to meet this requirement.
However, HMRC now accept that, from 19 March 2020, if an employee with EMI options granted before that date would otherwise have met the scheme requirements but did not do so for reasons connected to COVID-19, the time which they would have spent on the business of the company will count towards their working time. There is thus no “disqualifying event” and employees will retain the tax advantages of the scheme.
Legislation will be introduced in the Finance Bill 2020 to modify Schedule 5, Part 4 ITEPA 2003 which sets out the working-time requirement. More details can be found at the following link here
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