EMI options are great tax-favoured incentives for employees, but they do come with important administrative tasks. One of these tasks is notifying the EMI options to HMRC within 92 days of the date of grant. Often busy start-ups with limited management and financial resources might miss the deadline. This can lead to unwanted income tax and NIC charges at an exit event, causing stress for management and leaving employees unhappy. Although this is not the only way that the tax-favoured treatment can be lost.
The extension of the deadline to 92 days after the end of the relevant tax year for EMI options granted on or after 6 April 2024 is a welcome relaxation of these requirements. I had wondered if HMRC would change the system to only allow notifications after the end of the tax year and stop notifications during the year. Yesterday's HMRC Employment Related Securities Bulletin 54 confirmed that the notifications can still be made during the tax year.
Why is this important? It means that you can still do the notifications during the tax year (without the pressure of the 92 days) rather than having to do all the notifications for a whole tax year after 6 April and before 6 July together with the annual ERS returns.
My advice is to keep on top of the notifications, within a reasonable time of the grants, and not let them slip down your to-do list. The HMRC ERS system is far from perfect because you can't go into it afterwards to see any details of notifications, so always keep screenshots of your notifications. This will be one less thing to worry about on the due diligence list for investors or a buyer on an exit event. You should also have happier employees!
