Spring Budget 2023: good news for EMIs and CSOPs

Olivia Bailhe, Associate in the Russell-Cooke Solicitors, corporate and commercial team.
Olivia Bailhe
3 min Read

The UK Government has recently announced changes to Enterprise Management Incentive (EMI) share options and Company Share Option Plans (CSOP), aimed at simplifying the process.

From 6 April 2023, companies will no longer have to include details in EMI option agreements of any restrictions on the shares, or declare that an employee has signed a working time declaration when they are issued an EMI option.

These changes will apply to all options granted on or after 6 April 2023, as well as any options granted before that date but not exercised by then.

From 6 April 2024, the Government will extend the deadline for notification of EMI options to a fixed date of 6 July following the end of the tax year.

What does the share restrictions amendment mean in practice?

Option agreements can now be more straightforward, without needing to set out in detail the restrictions that will apply to the shares. This requirement has often tripped up companies putting in place EMI option schemes, so its retrospective application to all existing, unexercised EMI options is welcome news.

It is recommended that option holders should still be directed to the company’s Articles of Association to understand the rights and limitations of the shares they are being offered options over.

What is the impact of the change to the working time requirement?

It will no longer be necessary for EMI option holders to provide a working time declaration to the company before it can issue EMI options. It follows on that any penalties for failure to comply with the requirements relating to this declaration will also no longer apply.

It is important to note that despite the removal of the need to make a declaration, the minimum working time requirement itself of 25 hours per week (or 75% of total working time) must still be met.

When do I need to notify HMRC after granting EMI options?

For any options granted in the 2023/24 tax year, you should continue to notify HMRC within the window of 92 days post-grant.

For any options granted on or after 6 April 2024, you can notify HMRC at any time before 6 July following the tax year in which the options were granted.

How are the CSOP rules being varied?

It has been confirmed that the variations to the Company Share Option Plans (CSOP) announced in the Autumn Statement 2022 will also take effect on 6 April 2023.

From that date, businesses that are eligible for CSOP can issue options over shares worth up to £60,000 to each employee; double the previous limit of £30,000. Existing options granted prior to 6 April 2023 will remain unaffected by this change.

The restrictions on who can grant CSOP options are also being relaxed. The share class will no longer need to be “employee-controlled” or “open market”, meaning that more private companies with multiple share classes can qualify.

How we can help

If you are looking for ways to incentivise your employees and are considering implementing a CSOP or EMI plan, we can advise on your options and any legal requirements – please contact Olivia Bailhe for more information. Alternatively, please complete our online enquiry form.

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