EMI2: Greater flexibility for companies offering employee share options

The changes will make tax-advantaged share options more accessible to a wider range of businesses, giving employers more opportunities to attract, retain, incentivise and motivate employees by offering them a stake in the company.

What is changing?

• Higher individual limits: The maximum value of share options an employee can receive will increase from £60,000 to £120,000.
• Combining EMI and EMI2: Employees will be able to hold options under both schemes, potentially benefiting from up to £370,000 in combined tax-advantaged share options.
• Longer exercise period: The maximum period for exercising options will increase from 10 to 15 years.
• Existing schemes: Existing CSOP arrangements will automatically transition to EMI2, without requiring new paperwork.

There will also be changes to existing EMI rules, including extending the period for exercising options following certain disqualifying events from 90 to 120 days.

Who can access EMI2?

One of the key points is that EMI2 will be available to companies of any size, unlike the EMI scheme, which has strict eligibility criteria.

This means it could benefit:

• Small and medium-sized businesses looking to introduce share ownership as part of their employee reward packages.
• Larger companies that do not qualify for EMI because of their size or number of employees.
• Businesses in sectors excluded from EMI, which may previously have had limited access to tax-advantaged share option schemes.
• Companies already operating a CSOP, which will automatically benefit from the improved limits.
• Companies already using EMI that want to offer employees additional share options beyond the existing EMI allowance.

EMI2 does have different conditions to EMI. For example, options must be granted at market value, and employees will generally need to hold them for at least three years to benefit from the full tax advantages.