Enterprise Management Incentives ("EMI") schemes

Under these schemes, which can only be granted by independent trading companies or trading groups operating in certain sectors and with less than £30 million in gross assets, share options may be granted with a market value of up to £120,000 for each selected employee, or up to £3 million for all employees. Eligible employees must work a minimum of 25 hours a week or 75 per cent of their working time in the company that is granting the option. Options must be exercised within ten years.

Corporation Tax relief is available to the extent of the cost of providing the shares to the employees. There is normally no income tax or NICs to pay when the options are granted, nor when they are exercised provided the option price is at least the market value of the shares when the options were granted.

The employee will have to pay tax if appropriate gains are made when the shares are sold. Capital Gains Tax is payable (after the annual CGT allowance) at 18% or at 10% if the employee has held the shares for one year and qualifies for Entrepreneur's Relief (which requires a holding of at least 5% of the share capital).