Don’t Throw Our EMI Baby Out With The Brexit Bathwater

In case you haven’t had enough of Brexit…

Some of you may remember that there was a hiatus earlier this year when the UK government failed to renew state aid approval with the European Commission for enterprise management incentive (“EMI”) options, the most popular and tax-efficient scheme for smaller companies.

For around 6 weeks it was unclear whether EMI options could be granted, until the following announcement was made in May:

the Commission concluded that the measure [ie EMI] is in line with EU State aid rules. Without prejudice to any provisions of the Withdrawal Agreement, which is under negotiation, this Commission decision only applies until the UK ceases to be a Member State

So what will the position be after Brexit day, currently scheduled for 29 March 2019?

The position of already-granted options is fairly clear – the state aid was deemed given at the date of grant, so tax relief will be honoured.

But will new grants be possible?

HMRC has indicated that in the case of a hard Brexit (essentially, one where the UK no longer had to pay heed to EU laws relating to, eg, State aid), EMI will continue for the foreseeable future.

But if we continue to be bound by State aid rules, which seems likely in the case of most “deal” and even “managed no deal” scenarios, it seems likely the UK will need Commission approval to continue to operate EMI.

This would either be part of the withdrawal agreement or a separate decision as in May.

We will be adding our voice to those calling for the government to deal with the matter in good time to avoid the issues that arose in the Spring.

We would encourage other affected parties to do the same.

In the absence of any final decision, if you are considering establishing an EMI plan, or making further grants under an existing EMI plan, you might want to consider implementing it, or accelerating some grants so that they are made before 29 March Brexit.

And if you want to agree a share value with HMRC in advance, you should aim to get your submission in by mid-January at the latest, and ideally before Christmas.

Note that only EMI is affected of the tax-advantaged share schemes, as it is the only one limited to a size of company. CSOPs, SAYE schemes and SIPs


If you would like to discuss this in more detail please contact David Reuben or Robert Postlethwaite