EMI is subject to EU State Aid approval rules. During the Spring Budget 2017, the government confirmed it was seeking approval from the EU to extend the application of EMI as a tax relief beyond 2018. The deadline for this is 6 April 2018 and while the government claims to have followed due process, a final response and approval has not yet come from the European Commission.
This news only emerged from HM Revenue & Customs (HMRC) on 4 April 2018. They remain hopeful that the application will be extended, however, they can't put a timeline as to when this might happen. This means your options are limited to the following:
In the case of the second option, the uncertainty over how long it will take could create complications. Because EMI is based on a valuation of your business, the longer the wait the greater the likelihood the valuation will change. That could mean reissuing the valuation application.
Furthermore it could impact on the application of Entrepreneurs' Relief as employees could lose any number of months accruing. Where options are signed in the interim (post 6 April), it's not clear if approval will be retrospective in terms of from 7 April up to the date of when formal approval may be granted.
If approval isn't retrospective then signing options in the interim runs the risk and cost of having to reissue them. Things could be further complicated by the fact that Brexit is taking place in March 2019. Relations with the EU are changing and penalties could potentially be applied to individuals in the transitioning period.
HMRC considers that EMI options granted up to and including 6 April 2018 aren't impacted by the delay in granting EU State Aid approval.
The content of this post is up to date and relevant as at 09/04/2018.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.