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HMRC's Updates on Share Schemes

In its Employment Related Securities (ERS) Bulletin 31 published on 21 March 2019, HMRC has provided updates on various aspects of share incentives, especially Enterprise Management Incentives (EMIs). We highlight the key points arising in the bulletin below:


HMRC announced that it will amend its current guidance on determining the gross assets of a company for EMI purposes to include the IFRS 16 requirement to account for all leases on the company’s balance sheet. Companies who report under international financial reporting standards (IFRS) will be required to apply IFRS 16 for accounting periods beginning on or after 1 January 2019.

To qualify to grant EMI options, a company’s gross assets must not exceed £30m at the day of grant. The gross assets include all the assets shown on the company’s balance sheet without any deductions for liabilities. Recognising leased assets on a company’s balance sheet may cause the company’s gross assets to exceed the £30m limit which will make the company ineligible to grant EMI options to its employees.

Read more about IFRS 16 and how it impacts your share schemes here.

Working Time Declarations

Employees will be eligible to receive EMI options if at the time of grant, they work an average of at least 25 hours per week for their employer company or if less, commit 75% of their working time to the company (the “working time requirement”). The EMI legislation requires that employees sign a declaration that they satisfy the working time requirement at the date of grant. There is no template or model for the declaration (ERS Bulletin 16) but it must either be signed as a separate document at the time of grant or incorporated into the EMI option agreement, with both the company and the employee retaining their copies of the document.

Making a false declaration or failure to make the declaration at the time of grant may lead to a loss of EMI tax relief. However, in ERS Bulletin 31, HMRC has confirmed that it will consider issues relating to working time declarations on a case-by-case basis.

Restrictions on Shares

Employees must be made aware of restrictions attaching to shares over which they have been granted options at the date of grant. The relevant restrictions may either be included in the text of the EMI option agreement itself, or a separate document containing the restrictions may be referenced in the option agreement, with the referenced document attached to the option agreement.

HMRC’s update states that where options have been granted to employees without having made them aware of any restrictions attaching to their option shares, the company should seek to remedy this as soon as possible—i.e. bring these restrictions to the employees’ attention and in accordance with HMRC’s guidance. Failure to notify employees of restrictions attaching to their option shares may cause the options to lose their EMI tax advantaged status. However, HMRC has confirmed that failure to notify employees of trivial restrictions will not be a compliance issue.

If you have failed to notify your employees of any restrictions attaching to their option shares at the time of grant and are unsure of the tax status of these options, it is possible to seek clarification from HMRC before proceeding with any retrospective action.


HMRC’s ERS Bulletin 31 includes several other updates relating to other on-going compliance matters such as submitting annual returns for share schemes, what to do if you have registered a scheme in error or have made an error in your EMI notifications, etc. You can read more about these updates here.

Pett, Franklin & Co. LLP are experts in employee share schemesexecutive incentives and share valuations. To find out more about how we can help you or your client, please call 0121 281 5798.