Key Takeaway

EU State Aid approval for enterprise management incentive (“EMI”) plans expired on April 6, 2018, meaning that all EMI stock option grants (and possibly exercises) from April 6, 2018 through the effective date of new EU State Aid approval will be non-tax advantaged. Until new EU State Aid approval is received, companies with EMI option plans should consider (1) delaying new EMI option grants and (2) notifying affected optionees of the issue.


An EMI option plan is intended to enable small, privately-held companies to offer UK tax-advantaged stock options. If prescribed requirements are met, no income tax or national insurance contributions are due upon grant or exercise of an EMI option and, at the time of sale, the employee will be subject only to capital gains tax on the gain.

Unlike other UK tax advantaged share option plans, EMI plans are subject to EU State Aid approval. The previous approval was given in July 2009 and expired on April 6, 2018. HMRC recently released a bulletin indicating that it was unable to secure continued EU State Aid approval prior to the April 6 expiration date. It is not yet known when new EU State Aid approval will be given, but HMRC is still hopeful at this stage that it will be forthcoming in the next few months.

In its bulletin, HMRC expressed the view that while EMI options granted during the gap in approval will not be considered tax advantaged, options granted prior to the April 6th expiry date should not be affected. The European Commission may disagree, however, as HMRC’s view appears to conflict with the text of the previous approval, which states that the approval period applies in respect of EMI option exercises, rather than grants. A strict interpretation of the approval text would mean that all EMI option exercises will be non-tax advantaged during the gap in approval, regardless of when they were granted.

As such, companies with EMI option plans should consider delaying new EMI option grants and informing optionees of the issue, so that they may delay exercise until new EU State Aid approval is received.

Please refer to our London office’s alert for additional details and contact your Global Equity Services attorney with any questions.

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