ETASSUM53030 - Enterprise Management Incentives (EMI): Eligible employees: Calculation of working time examples

Paragraphs 26 & 27, Schedule 5 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)

Example 1

A works as an employee of the EMI company for 16 hours a week so he does not meet the 25 hours requirement. He also works as a consultant for 5 hours per week. He does no other paid work. His total working time amounts to 21 hours a week. As 76% of his working time is for the EMI company, he meets the 75% requirement and will qualify the grant of an EMI option.

Example 2

B works as an employee of the EMI company for 20 hours a week so she does not meet the 25 hours requirement. She also works as a self-employed engineer for 10 hours per week. She does no other paid work. Her total working time amounts to 30 hours a week. Only 66% of her working time is for the EMI company, so she will not qualify for the grant of an EMI option.

Example 3

C was granted EMI options in March 2015 and has worked 40 hours a week for his employer throughout the life of the options. On 25 March 2020, C was furloughed by his employer under the Coronavirus Job Retention Scheme (CJRS) and remains in furlough.

HMRC will accept that this is related to the coronavirus (COVID-19) pandemic and EMI options remain qualifying.

In calculating the total working time, any time on sick leave, annual leave, maternity, paternity or parental leave needs to be taken into account, as do reasons connected to the coronavirus (COVID-19) pandemic after 19 March 2020 until 5 April 2022.

If employees do not work as much time as they had planned to do and this brings them below the commitment of 25 hours each week, or 75% of their working time, they do not qualify for an EMI option.

If an employee ceases to satisfy the working hours requirement during the year, this is a disqualifying event and the tax treatment of an existing option will be affected (section 535(2) ITEPA – refer to ETASSUM57090).