HMRC update on furlough and EMI

01 July 2020

HMRC has announced that option holders who are furloughed or who have had their working hours reduced as a result of COVID-19 during the period 19 March 2020 - 5 April 2021 will not lose the tax advantages and reliefs of Enterprise Management Incentive (EMI) as a result.

The impact of furlough leave on EMI option holders has, to date, been an issue of serious concern for many. Holders of EMI options are required to meet the working time requirement in respect of their employing company. On the face of it, an option holder who has been furloughed for any significant period of time would fail to meet this requirement, triggering a disqualifying event under the EMI legislation. 

This announcement, which demonstrates a practical (albeit expected) approach by HMRC, provides much needed clarity for individuals granted EMI options and provide clarity for companies finding their way in this uncertain time. 

Modification to Schedule 5, Part 4 ITEPA 2003 will be implemented by the Finance Bill 2020 and apply for the limited period of 19 March 2020 to 5 April 2021. 

If you would like to discuss this EMIs further please contact Lisa Hayward, Head of Employee Incentives at Birketts.

The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at July 2020.