One of the problems with Entrepreneurs’ relief as opposed to the old rules on Business Asset Taper Relief, was that employee shareholders could struggle to acheive the relief due to the 5% holding requirement. This position has now been relaxed where shares are acquired through an Enterprise Management Incentives scheme, meaning it should now be easier to obtain Entrepreneurs’ relief on Enterprise Management Incentives (EMI) share options.
Draft proposals under the Finance Bill 2013 will remove the requirement for a person to hold at least 5% of the ordinary share capital of a company in order to qualify for entrepreneurs’ relief on shares acquired through a qualifying EMI share option scheme.
The legislation will also be changed to allow the period in which the options are held to count towards the 12 month holding period required to qualify for entrepreneurs’ relief.
These announcements will therefore increase the already highly efficient tax treatment of EMI schemes, and potentially enhance the incentivisation of employees under such schemes. Even where the share option scheme itself is not desired, EMI schemes could potentially be used to enable employees to acquire shares that will qualify for Entrepreneurs’ relief, as there is no minimum exercise period for EMI options.
