HMRC have issued statistics showing the adoption of tax advantaged employee share schemes in the tax year ended 6th April 2020. These – see: HMRC Statistics – show the total number of companies operating a tax advantaged share scheme increasing by 6% to 15,340. However, this headline number masks more complexity, with the detailed numbers showing substantial growth in EMI schemes but a relative decline in other types of scheme.
We do not find this surprising. EMI offers the most substantial overall tax benefits of all the tax advantaged schemes with the ability to structure the arrangements with more flexibility than any of the other schemes. The combination of corporation tax relief for option gains, no income tax or NICs on growth in value from the date of grant and capital gains tax with a 10% rate on realisation gives the potential for an overall negative rate of tax.
We therefore expect the use of EMI to continue to flourish with the indications from the Call for Evidence being that EMI continues to receive Government support.
If you would like to discuss this or any other aspect of share plans further, please call 0121 281 5798.