EMI reliefs currently withdrawn

On 4 April 2018 HMRC announced that the EU State Aid Exemption for EMI options would expire on 6 April 2018.

This creates a clash between UK and EU law: although, according to the letter of the UK legislation, HMRC would have to accept any claims for tax relief in respect of EMI options granted after 6 April 2018, there would be a risk that HMRC would be compelled by the EU to then claw-back the tax relief from the individuals and companies who benefitted from it.

HMRC has stated that the effect of the failure to renew the EU State Aid Exemption is that they will not give relief to EMI options granted after 6 April 2018.  Instead the option may be treated as a non-tax advantaged share option.

Any options that had been granted under an EMI scheme before 6 April 2018 are effectively ‘grandfathered’ and will continue to enjoy their tax advantaged status.

HM Treasury are unable to provide any firm timetable for a decision, however indications suggest that the process may take weeks, rather than months.  We believe that the EU State Aid Exemption will be renewed (Sweden has recently had an exemption granted for a very similar scheme), it is difficult to see a definitive view on the timing of the EU’s decision-making process.

In our view, companies who are working on granting EMI options should continue to make their preparations, but should wait until we have clarity on the likelihood of receiving a renewed exemption (and the date from which it will be effective) before actually granting options.

We also recommend that companies defer requesting valuations from HMRC SAV, as the valuations only have a limited lifespan.

If you require further information, please contact either Reshma Johar or Thomas Dalby on 0845 4900 509.