Furloughed Workers To Retain EMI Scheme Benefits Under New Rules

Advice, Talent and Tax

August 4, 2020

EMI scheme participants will be able to maintain the tax advantages and reliefs even if they were furloughed or worked reduced hours due to COVID-19.

The rules of EMI Share Option Schemes require participating employees to commit to the company at least 25 hours per week or, if less, 75% of their working time.

Of course, the COVID-19 crisis meant that millions of employees have been furloughed, or are working reduced hours as a result of the pandemic.

This means they may not be able to meet the committed working time requirement, preventing them from being granted new options.

However, HMRC announced that under the Finance Bill 2020, a time-limited exception to the disqualifying event rules has been introduced. This way, existing participants of EMI schemes are not forced to exercise their options much earlier than planned – potentially missing out on tax benefits – as a result of the pandemic.

The time-limited exception applies from 19 March 2020 to 5 April 2021.

HMRC, in fact, will accept that an employee who is already a participant or about to be granted options under an EMI Share Options Scheme, will meet the working time requirements, as long as they would have done so under their regular working times, even if they are not currently doing so for reasons connected to the coronavirus pandemic.

This measure ensures that EMI participants can maintain the tax advantages and reliefs as if they had continued to work for their employer as per their employment contract during the coronavirus (COVID-19) pandemic.

The tax benefits of EMI Share Options Scheme allow participating employees to acquire shares in their company and to dispose of them at only 10% tax rate, as opposed to rates as high as 45% under unapproved schemes.

Legislation will also be introduced in Finance Bill 2020-21 to ensure that employers can issue new EMI Share Options to individuals who have been furloughed, have taken unpaid leave or have had their working hours reduced below the current statutory working time requirement a consequence of COVID-19.

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