Changes to the rules relating to EMI and CSOP options

The UK Government announced in the Spring budget on 15 March 2023 certain changes to how EMI share options are granted, designed to simplify the process. These will come into effect on 6 April 2023, with one future change for 2024. The reform of CSOP options announced in last year's Autumn Statement will also take effect this April and will widen who may grant and benefit from these options.

Three key changes were announced at the Spring budget:

• from 6 April 2023 there will be no requirement to include details of share restrictions in EMI option agreements;
• from 6 April 2023 there will be no requirement for the company to declare that an employee has signed a working time declaration though it is not clear that the requirement for the employee to sign such declaration is being abolished; and
• from 6 April 2024 the time period for notification of EMI options will be extended from 92 days after grant to 6 July following the tax year in which grant occurred.

The first two changes will also apply to any options granted before 6 April 2023 but not exercised before such date.

Share restrictions – what do I need to do?

If you are now granting EMI options, you can grant these without including details of the restrictions applicable to the shares.  If you have previously granted EMI options and forgot to include these, you do not need to do anything unless those options will be exercised before 6 April 2023. If options will or may be exercised before 6 April 2023 however, the previous requirements should continue to be adhered to.

Working time – what do I need to do?

In order for someone to be eligible for the grant of an EMI option, they must, among other things, be an employee and their committed working time for the company must be either an average of 25 hours per week or, if less, 75% of their overall working time. This requirement is not changing and you should continue to ensure EMI options are only granted to individuals who meet these requirements.

It is currently not clear if the requirement for an employee to confirm their compliance with the working time requirements is being abolished completely so we would suggest keeping this in for now until greater clarity is received.  If options may or will be exercised before 6 April 2023 however, the previous requirements should be adhered to in any event.

EMI notifications – what do I need to do?

You should continue to notify options within 92 days of the date of grant for now.  Even after the law changes in April 2024, you should aim to notify options sooner rather than later, to ensure you do not miss the deadline.

Please remember to screenshot each step of the notification as normal.

What about CSOP?

As a reminder, for companies who do not qualify for EMI, changes announced last Autumn also take effect on 6 April 2023 – these may enable those companies to operate another UK tax favoured discretionary option plan, the Company Share Option Plan (CSOP) if they do not currently qualify, by doubling the individual CSOP limit to £60,000 and relaxing the current share class restrictions, widening access to companies with multiple share classes.  You can find out more here.

Anything else?

Finally, the Government has announced that it will launch a call for evidence in respect of two other UK tax favoured share plans: Share Incentive Plan (SIP) and Save As You Earn (SAYE). Simplification of these all-employee plans could be of benefit to companies who currently find them too onerous and costly to implement.