The Esop Centre responded to the Treasury’s Call for Evidence, on whether and how more UK companies should be able to access share options based Enterprise Management Incentive to help them recruit and retain the talent they need to scale up, urging chancellor Rishi Sunak to reboot EMI by tearing up its archaic and increasingly irrelevant rule book.
An expert Centre ad hoc committee drew up a list of major changes it would like to see implemented, in order to expand access to the tax-advantaged EMI to thousands more gazelle-type smaller UK companies.
The Centre’s main recommendations for change – in what is already the UK’s most popular tax-advantaged employee share scheme ever – are:
- Remove completely the current £3m limit on the total unrestricted market value at grant date of qualifying EMI share options in any one company.
- Increase the qualifying Gross Asset Value (GAV) test from £30m to £75m.
- Remove or replace the Working Time Declaration (WTD) because it involves too much wasteful data and paperwork.
- Remove or replace the 92 day reporting requirement for new qualifying EMI options.
- Amend the Disqualifying Event rules for eligible employees who leave the company with its blessing.
- Introduce a Green Exception for leasing companies who are currently among the activities, such as financial services, excluded from EMI qualification.
- Modify the Independence Test for subsidiaries and private equity backed companies.
The EMI committee comprised leading advisers: Damian Carnell, director of Corporate Growth Ltd; David Craddock, founder & director of David Craddock Consultancy Services; Colin Kendon, partner and head of incentives at Bird & Bird and tax barrister and employee share scheme doyen, David Pett of Temple Tax Chambers. It was chaired jointly by Malcolm Hurlston, founder of the Esop Centre and by Alderman Professor Michael Mainelli, executive chairman of Z/Yen, which operates the Centre.