A motivated workforce is a productive workforce and one way to ensure this is to offer an employee share scheme, such as an Enterprise Management Incentive (EMI) scheme.
If you are an employer then an EMI scheme is an excellent way of enabling your employees to acquire shares in a tax efficient way over a period of time. This can increase motivation among your workforce which, in turn, can improve their performance.
An EMI scheme is also a good way of retaining key employees, particularly at critical times such as the early stages of your company or when you are working on a major project. By turning cash benefits into future share rewards, an EMI can effectively lock an employee in to your company until the point of a sale or another significant milestone is reached.
You may also want to reward loyal key employees for their efforts in achieving a sale, effectively giving them a share of the proceeds.
It is important to bear in mind that once an employee exercises their share option, they become a co-owner of the company and their rights must be respected.
One of your first decisions will be the value to place on your company and its shares. This can be very subjective, which is why it is important to have the right advice from an accountant with experience of share schemes. At Murphy Salisbury, we can value your business and your shares so that you know how much you can afford to give employees without setting unrealistic targets that might not be met.
To qualify to offer an EMI scheme, your company must have gross assets of less than £30 million and fewer than 250 full-time employees on the date that an option is granted. Certain trading activities can exclude a company from taking part in the scheme, including operating a nursing or residential care home, operating a hotel or guest house, farming and financial activities such as banking, lending, insurance or hire purchase financing.
Changes which came into force on 6 April 2013 mean that staff with shares will qualify for capital gains tax at a lower rate of 10 per cent on the sale of their shares from a year after the options were granted, rather than the previous rate of 28 per cent. The five per cent ownership threshold to qualify for the relief has also been removed.
To find out more about how our leading firm of accountants in Stratford-upon-Avon and Warwickshire can help you implement an EMI scheme, please contact us.