Policy paper

Enterprise Management Incentives: Improvements to the Process to Grant Options

Published 15 March 2023

Who is likely to be affected

Companies that use the Enterprise Management Incentives (EMI) scheme, a tax advantaged share scheme available to eligible companies in the UK.

General description of the measure

The measure makes changes to simplify EMI by removing two administrative requirements when companies grant EMI options from 6 April 2023.

Firstly, it removes the requirement for the company to set out within the option agreement the details of any restrictions on the shares to be acquired under the option.

Secondly, it removes the requirement for the company to declare that an employee has signed a working time declaration when they are issued an EMI option. It does not remove the working time requirement itself.

From 6 April 2024, the government will also extend the deadline for notifying an EMI option from 92 days following grant to the 6 July following the end of the tax year. This will be legislated separately and the impacts will be set out at that point.

Policy objective

The measure supports small and medium sized companies to recruit and retain staff by simplifying the process to grant EMI options.

Background to the measure

At Budget 2021, the government published a call for evidence to seek views on whether the EMI scheme should be expanded.

At Spring Statement 2022, the government concluded the EMI scheme remains effective and appropriately targeted, but expanded the review to consider the Company Share Option Plan (CSOP). Changes to CSOP were announced at the fiscal statement made on 23 September 2022 and these will be introduced from 6 April 2023.

Many who responded to the call for evidence commented on the administrative requirements of the EMI scheme, in particular the process to grant options, and the government has announced these changes in response.

Detailed proposal

Operative date

The measure will apply to EMI share options granted on or after 6 April 2023. Existing EMI share options granted before 6 April 2023 that have not been exercised will also benefit from the changes.

Current law

Current law is included in Schedule 5 to Income Tax (Earnings and Pensions) Act (ITEPA) 2003.

Proposed revisions

Legislation will be introduced in Spring Finance Bill 2023 to modify Schedule 5 to ITEPA 2003 in the following ways:

• Paragraph 37 will be amended to remove the requirement for a company to include details of the restrictions on the shares that can be acquired, within the option agreement.

• Paragraph 44 will be amended to remove the requirement for a company to declare that an employee who was granted options, signed a working time declaration.

• Paragraph 57A will be amended to remove the penalty for failing to produce a signed working time declaration or to provide a copy to the employee.
• New provisions will be introduced to allow EMI share options that were granted before 6 April 2023, but not exercised, to also benefit from the changes.

Summary of impacts

Exchequer impact (£m)

2022 to 2023	2022 to 2023	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028
—	negligible	negligible	negligible	negligible	negligible

This measure is expected to have a negligible impact on the Exchequer.

Economic impact

This measure is not expected to have any significant macroeconomic impact.

Impact on individuals, households and families

This measure will impact on an estimated 45,000 individuals by improving the process for companies to grant options to their employees to purchase shares. It will reduce the administrative tasks associated with granting options and therefore make the process simpler. Employees who are granted options will no longer have to sign a working time declaration. This measure is not expected to impact on family formation, stability or breakdown.

This measure is expected to overall improve individuals’ experience of dealing with HMRC as the changes are likely to reduce administrative activities associated with granting options.

Equalities impacts

It is not expected that there will be adverse effects on any group sharing protected characteristics.

Impact on business including civil society organisations

This measure is expected to have an impact on an estimated 4700 small and medium companies granting options under EMI schemes as it will make the process to grant options easier. This is expected to improve businesses’ experience of using EMI as the changes are likely to reduce resources spent on administrative activities associated with granting options. This measure is not expected to impact civil society organisations.

One-off costs could include businesses having to familiarise themselves with the new rules. These costs are estimated to be negligible. There are not expected to be any continuing costs. Continued savings include employers no longer have to ensure that an employee, who was granted options, has signed a working time declaration. These savings are estimated to be £3.0 million across all users.

Estimated one-off impact on businesses (£million)

One-off impact	£(m)
Costs	negligible
Savings	—

Estimated continuing impact on administrative burden (£million)

Continuing average annual impact	£(m)
Costs	—
Savings	3
Net impact on annual administrative burden	-3

Operational impact (£m) (HMRC or other)

The operational impact of this measure for HMRC are minimal. Simple IT changes will be required to support delivery of this measure.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

HMRC will keep the measure under review in line with HMRC’s Evaluation Principles. The measure will be monitored through consultation with the HMRC led Share Schemes Forum.

Further advice

If you have any questions about this change, please email: shareschemes@hmrc.gov.uk.