Enterprise Management Incentives (EMI) Schemes
- Corporate Law
- 14th Jul 2025
EMI schemes are a popular and tax-efficient share option plan designed to help small and medium-sized enterprises (SMEs) in the UK attract and retain employees. Purpose and Eligibility EMI schemes aim to incentivise employees, but an effective plan must consider both the commercial design and the tax treatment of the structure. Participants must be employees […]
By Rachel Owen
mlplaw
EMI schemes are a popular and tax-efficient share option plan designed to help small and medium-sized enterprises (SMEs) in the UK attract and retain employees.
Purpose and Eligibility
EMI schemes aim to incentivise employees, but an effective plan must consider both the commercial design and the tax treatment of the structure. Participants must be employees of the company or its qualifying subsidiaries. Non-executive directors and consultants are excluded, but directors who meet employee criteria are eligible. In addition to recruiting and retaining staff, they can be used to incentivise, enforce positive behaviours, reward performance and support the culture of the company.
Tax Advantages
EMI schemes offer significant tax benefits. However, non-compliance with statutory requirements can result in options being taxed as unapproved, leading to income tax and National Insurance contributions (NICs) liabilities. Accountants/tax advisers must be consulted to value the option shares, agree this valuation with HMRC and notify HMRC when options are granted and register the scheme online.
Restrictions
Options must be granted under a written agreement with specific details and/or scheme rules. The value of shares granted is subject to legislative limits, and the scheme must align with commercial purposes. Schemes can be performance based or only exercisable upon an exit event.
Compliance Risks
Non-compliance, such as improper implementation or disqualifying events, can cause options to lose EMI status, resulting in adverse tax consequences.
Conclusion
EMI schemes are a useful method for SMEs to reward employees while benefiting from tax efficiencies. However, adherence to eligibility criteria, legal conditions, and operational requirements is essential to ensure their advantages and maintain compliance.
For further information on EMI schemes and assistance on implementing a scheme, please contact the Corporate team at mlplaw at 0161 926 9969 or corporate@mlplaw.co.uk
About the expert
Rachel Owen
Partner - Corporate
Rachel is a highly experienced Corporate lawyer who joined mlplaw in 2019 from a national law firm and now leads the Corporate Team. Rachel’s main area of work is mergers and acquisitions covering share and asset acquisitions and disposals, but includes management buy-outs, investments, group re-organisations, demergers, joint ventures, shareholders agreement, articles of association, cross options, share capital arrangements, corporate governance, employee ownership schemes and share incentive schemes. She has a pragmatic approach and understands client’s priorities and objectives. She assists with the day to day needs of business clients. Rachel has gained particular experience in the Insurance and Healthcare sectors, but acts for clients from across the spectrum.
Arrange an appointment
Let’s start by getting to know you and your business - either on the phone or in person. Complete the form below and we’ll be in touch shortly.
