EMI option scheme - step by step guide to setting up your scheme

The Enterprise Management Incentive (EMI) Scheme is UK’s tax efficient way of granting share options to employees. Through EMI, there is no tax payable when you grant an employee a share option, no tax payable when the employee exercises the share option at the strike price agreed with HMRC, and when the underlying share is later on sold at a profit the capital gains tax is set at 18% (instead of the standard rate of capital gains tax) if the employee has held the options or shares for at least 2 years and qualifies for Business Asset Disposal Relief. 

SeedLegals’ EMI option scheme is fully compliant with UK’s legislation.

Here’s an article to help you decide when the right time is to set up an EMI option scheme.

Please ensure your company qualifies for an EMI option scheme, here is an interesting article you might want to check out.

This guide will walk you through the full process of setting up your EMI option scheme on SeedLegals.

1. Create an option pool
2. Input your EMI valuation details
3. Set up your EMI option scheme
4. Register your EMI option scheme with HMRC
5. Grant options
6. Notify HMRC of your option grants
7. Joint NIC Election

1. Create an option pool

This should already be completed by this stage, but if not, please follow along with this guide: How to create an option pool

2. Input your EMI valuation details

You should have a valid EMI valuation from HMRC, our step-by-step guide to completing your EMI valuation application on SeedLegals can be found here.

Input the approved AMV and UMV from your EMI valuation approval letter to your EMI valuation. 

That said, you can set up an EMI scheme before HMRC approves your EMI valuation, but you must have that approval in hand before officially granting the options.

3. Set up your EMI option scheme

We have a video tutorial taking you through the next steps following receipt of an approved EMI valuation from HMRC here. 

You can set up your EMI scheme from the Share Options window on the left-hand side of your SeedLegals dashboard and then click '+New scheme'. You'll then need to click 'Create' under the EMI scheme and select the share class over which you want to grant EMI options.

Then, you can choose the terms of your scheme relating to vesting and exercise. These rules will be the default rules for each team member added to the scheme, however, if you wish to, you can change the vesting rules when granting to specific team members.

You may want to check out our guide with the most commonly selected terms here. Once you have selected the terms that you want, you'll need to click on 'Create' the EMI option scheme rules.

You are then ready for the company to adopt the option scheme. Please hold a Board meeting and then enter the details of the meeting under the Board Resolution below. Then the chairperson will sign the Board Resolution. Once this is done, please click on 'Adopt scheme'.

4. Register your EMI option scheme with HMRC

Please remember to register your EMI option scheme with HMRC, our guide here will take you through just how to do so.

Once done, please input the date of your registration into the EMI scheme workflow.

If you have multiple EMI option schemes you only need to register one scheme. 

5. Grant options

You can now set up your option grants for your employees using our guide here. You may find our short Loom video guide here useful as well.

Please remember to hit 'Approve option grant' when you are done! You will then be able to issue option certificates to your option holders.

To do so, head back to the Share Options window and click on the Option Certificates tab.

You'll then see the option certificates for your option holders. Hit Sign All for all of your Option Certificates, and 'Actions: Email Certificates' to send them out to your options holders.

This short video takes you through option certificates on SeedLegals. 

6. Notify HMRC of your option grants

Any grants made on or after 6 April 2024 only need to be notified to HMRC once a year along with your EMI annual return by the 6th of July every year. Our guide here will take you through just how to do so. 

However, we strongly urge companies to report regularly, such as once the options are granted. Instead of waiting until the deadline to make the notification, to avoid the risk of missing the filing.

7. Joint NIC Election

This needs to be done before the exercise of any options, but you may wish to do so earlier so that you don't have to worry about it in the future. 

If you’re transferring NIC liability to the option holder, see this guide.

8. The team will complete a final review of your scheme

Please reach out to your dedicated Share Options Associate so they can help review your EMI scheme and grants set up to ensure everything is in order. 

If you have successfully followed all of these steps then congratulations, you will have completed your EMI option scheme and EMI grants. Which you can view at any time from the Share Options window on your dashboard.

As always with SeedLegals - we're here to support you every step of the way - so if you get stuck or need a bit of help - hit the chat on the bottom right.