The EU issued a press release yesterday (15 May 2018) saying that it had approved the renewal of State Aid approval for EMI options.
HMRC announced late on 4 April that it had not secured EU State Aid approval for EMI before the current approval expired on 6 April.
As a result, any options granted from 7 April were not guaranteed EMI tax-advantaged status and risked being treated as non-tax advantaged options. This meant the EMI tax reliefs would be denied, resulting in income tax and potentially National Insurance contributions (NICs) being payable on the full option gain (broadly the difference between the exercise price and the market value of the shares at the date of exercise).
The advice from HMRC was not to grant any further EMI options on or after 7 April 2018 until this issue was resolved.
David Scott, a partner in our tax team, says: “This is fantastic news. We have various clients who had to put EMI options on hold and we feared it would take longer than this for the EU to grant their approval.
“We are still waiting for the details of the actual EU decision and HMRC has not issued a statement yet so we would urge a degree of caution in actually implementing new EMI option grants for now. However, we can now start work helping clients to prepare for granting EMI options again.”