Navigating the new normal

Protect the role but lose the incentive? Welcome news for EMI option holders on furlough


All content on this page is correct as of July 13, 2020

Enterprise management incentives (“EMI”) options are a type of employee share option which benefits from favourable tax treatment. To be eligible for an EMI option, an employee must work for at least 25 hours per week, or if less, at least 75% of their working time (“Working Time Requirement”).

If the employee subsequently fails to meet this requirement, this constitutes a disqualifying event (“Disqualifying Event”). If an option is not exercised within 90 days of a disqualifying event, the tax relief will be lost.  

In response to the pandemic, the Government introduced the Coronavirus Job Retention Scheme (“CJRS”) under which employers were able to “furlough” employees and apply for a grant to cover a portion of their usual monthly wage costs. When the scheme was introduced, furloughed employees could not undertake any work-related activities. This resulted in immediate concern for EMI option holders. Although the CJRS has since evolved (see our Flexible Furlough Scheme Updates) if an employee was furloughed they would, by default, fall foul of the Working Time Requirement.

As expected, we have now received welcome confirmation that where an EMI option holder has not been required to work for reasons connected with coronavirus, this will not (in itself) mean that they fail to meet the Working Time Requirement. Amendments to the Finance Bill 2020 (which will receive Royal Assent this summer) will make temporary changes to the EMI legislation with effect from 19 March 2020 until 5 April 2021 (with a potential to be extended to 5 April 2022).

Specifically, an EMI option holder’s time spent on furlough, reduced hours or unpaid leave for reasons connected with coronavirus, will be considered time they would have spent on the business and will count towards the Working Time Requirement. Additionally, a Disqualifying Event will not arise as any time the option holder is not required to work for reasons connected with coronavirus is counted as reckonable time. This confirmation should put to rest most concerns about the impact of CJRS on existing EMI option holders.

If you are looking to put EMI options in place to retain and incentivise employees whilst conserving cash, contact Mark Tasker ([email protected]), Stephen Callender ([email protected]) or anyone in our Corporate Team.


This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.

All content on this page is correct as of July 13, 2020.

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