ETASSUM53060 - Enterprise Management Incentives (EMI): Eligible employees: Material interest - meaning of associate

Paragraph 31, Schedule 5 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)

For the purposes of the material interest tests, associate means:

• relatives of the employee, that is a spouse or civil partner, parent, grandparent, child, grandchild or remoter relative in the direct line. However, for the purposes of EMI it does not include siblings,
• any partner of the employee,
• the trustees of any settlement in relation to which the employee or any relative is or was a settlor,
• if the company has shares in trust, the trustees of any settlement where the employee has an interest, or
• the personal representatives of a deceased person, where company shares are part of the estate and the employee has an interest in the estate.

Settlement here means a trust. Settlor means the person who provided funds for the trust, (section 20 ITTOIA 2005).

For EMI, associate does not include the trustees of:

• Schedule 2 SIPs, or
• employee benefit trusts and discretionary trusts, in certain circumstances.

The trustees of an employee benefit trust (EBT) are not treated as associates unless the employee, together with his associates except for the trustees of the EBT, has had a material interest in the company at any time since 13 March 1989. This applies if the EBT is a qualifying EBT in accordance with section 550 ITEPA.