Finance Bill Tracking Service 2010 | Budget 2010

BN13 ENTERPRISE MANAGEMENT INCENTIVES

Who is likely to be affected?

1. Companies wishing to offer share options to their employees under Enterprise Management Incentives (EMI).

General description of the measure

2. This measure amends the requirement that a company granting qualifying EMI options to its employees must operate "wholly or mainly" in the UK. A company granting EMI options will now be required instead to have a "permanent establishment" in the UK.

3. The Government intends to legislate this measure in a Finance Bill to be introduced as soon as possible in the next Parliament.

Operative date

4. The change will have effect in respect of EMI options granted on or after the date that the legislation receives Royal Assent.

Current law and proposed revisions

5. Paragraphs 13 to 15 of Schedule 5 to the Income Tax (Earnings and (Pensions) Act 2003 require that, in the case of a single company granting EMI options to its employees, that company must carry on a trade "wholly or mainly" in the UK or, in the case of a parent company, at least one company in the group must be carrying on a "qualifying trade" (within the meaning of the legislation) "wholly or mainly" in the UK.

6. To ensure EMI complies with EU State aid guidelines, the present rule will be amended. In future, a single company wishing to grant EMI options must have a "permanent establishment" in the UK. Alternatively in the case of a parent company, at least one company in the group that is carrying on a "qualifying trade" within the meaning of the legislation must have a "permanent establishment" in the UK.

7. "Permanent establishment" has the same meaning as in section 148 of the Finance Act 2003.

Further advice

8. If you have any questions about this change, please contact Andrew Ellis on 020 7147 2658 (email: shareschemes@hmrc.gsi.gov.uk). Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk