EMI excluded industries: Why some trades don’t qualify

The Enterprise Management Incentive (EMI) scheme is one of the most generous share option schemes in the UK. It helps smaller, high-growth companies attract and retain talent by rewarding employees with tax-advantaged share options.

But not every business qualifies. Beyond the size (under 250 employees) and independence tests, certain industries are excluded entirely.

So why does HMRC exclude specific trades? And what can those businesses do instead?

Let’s break it down.

A quick recap: What EMI is (and why eligibility matters)

EMI options allow employees to buy shares in their company at a fixed “strike” price, usually the market value at the time of grant. If the company grows, employees share in that upside – while benefiting from capital gains tax rather than income tax when they eventually sell.

It’s a fantastic deal, both for teams and for employers (who usually get a corporation tax deduction when options are exercised).

But EMI is a targeted incentive, with a list of requirements. The government designed it for companies that:

• Are small to medium in size, and
• Operate in “qualifying trades” – that is, activities that genuinely contribute to growth, innovation, and risk-taking in the UK economy.

And that’s where the excluded industries come in.

Take our quick quiz to find out if your business is eligible today!

Why are some industries excluded from EMI?

The exclusions aren’t arbitrary. HMRC drew up a list of “excluded activities” that don’t fit the purpose of the EMI scheme.

Broadly speaking, these industries are excluded because they tend to be:

1. Asset-heavy or capital-intensive, rather than people- or innovation-driven.

2. Low-risk or steady-return sectors, not the high-growth businesses EMI is meant to reward.

3. Heavily regulated or complex to value, which makes share-based incentives tricky.

4. Passive or investment-based, where income comes from holding assets rather than trading or creating new value.

Let’s look at the main groups in turn.

EMI excluded industries

Financial services and lending

If your company’s trade involves banking, insurance, lending, leasing, or other financial activities, you can’t use EMI.

These businesses deal in financial capital and are already subject to strict regulation. HMRC excludes them because the state doesn’t want to subsidise risk-taking in financial markets – or blur the line between financial investment and entrepreneurial growth.

That means traditional lenders, insurers, or factoring and hire-purchase companies are all out.

However, advisory firms (such as financial consultancies that don’t handle client money) can sometimes qualify, provided their activities are not “substantially” financial.

Legal and accountancy services

Professional firms such as law practices, accountancy firms, and auditors are also excluded.

Why? Because these are established service professions rather than high-risk ventures.

They rely on human capital, not scalable IP or product innovation. From HMRC’s perspective, they don’t need government-backed equity incentives to attract or retain talent.

If, however, such a firm develops a separate product or software arm, that arm may qualify on its own – so long as the professional services side doesn’t make up a “substantial part” of the trade.

Property and real estate

Activities like property development, investment, or management are among the most common EMI dealbreakers.

That includes:

• Buying and selling land or buildings.
• Letting or renting property long-term.
• Managing hotels, care homes, or similar premises.

Property is an asset business, not a trading business. It’s driven by capital values and leverage, not by innovation or intellectual property.

Even if your property company is small, you’ll fall outside EMI. However, if property is only a minor part of what you do (say, less than 20% of revenue or assets), you might still qualify.

Agriculture, forestry and related trades

Businesses engaged in farming, market gardening, or timber production are excluded too.

These trades are often seasonal and low-margin, with returns tied to land use and commodity prices rather than entrepreneurial innovation.

There is one nuance: if you’re processing timber (for example, turning raw wood into finished products), that downstream activity may be eligible, even though raw forestry isn’t.

Hotels, care homes and similar operations

Running a hotel, care home, or residential care business generally means your trade is based on property and facilities rather than scalable product growth.

These industries are typically capital-heavy and regulated, which makes EMI less suitable. That said, some businesses in hospitality are now spinning out software or platform arms, for instance, a booking tech subsidiary, which might qualify independently.

Royalties and licensing businesses

If your company mainly earns royalties or licence fees from intellectual property, rather than trading directly, you’re in another excluded group.

The reasoning? HMRC treats that kind of income as passive, similar to investment income. EMI rewards active trading, creating and selling products or services, not collecting licence fees.

Providing facilities or services to excluded businesses

Finally, even if your trade isn’t excluded in itself, you may still fall foul of EMI rules if you mainly provide services or facilities to another business that operates in an excluded sector – especially if there’s overlap in ownership or control.

This rule exists to stop companies from creating “shell” service subsidiaries purely to access EMI benefits.

The “substantial part” test

You might have noticed this phrase cropping up a lot: “a substantial part of the business.”

HMRC uses it as a threshold to decide whether your trade is mainly excluded or not. While there’s no hard line, 20% is often used as a practical benchmark.

If excluded activities make up less than about 20% of your overall trade (by revenue, assets, or time), you might still qualify.

But if those activities dominate, EMI won’t apply – even if your company otherwise fits the size criteria.

What if your business is excluded?

Being in an excluded industry doesn’t mean you can’t incentivise your team with shares. It just means you’ll need a different vehicle to do it.

Here are some of the most common alternatives.

CSOP (Company Share Option Plan)

CSOPs are another HMRC-approved scheme, open to more types of businesses. The tax perks are smaller, and there’s a lower per-employee limit, but they can still offer a tax-efficient route.

Growth shares

Instead of options, you can issue growth shares that only deliver value once the company exceeds a certain hurdle. This is popular in property and professional services firms that want to reward key contributors without giving away existing equity.

Unapproved share option plans

Unapproved options are flexible and widely used. You can set your own rules on vesting, performance, and strike price. The trade-off? They don’t get EMI tax benefits, so employees may pay income tax and NICs on exercise.

Phantom shares

Phantom shares mimic the financial upside of shares but are paid in cash when the business hits certain goals or milestones. Because no real shares are issued, they’re simple to manage in regulated or asset-heavy sectors.

How excluded businesses can stay flexible

If you’re in an excluded industry, consider these practical steps:

• Audit your activities – Quantify how much of your revenue or assets come from excluded trades.

• Ring-fence eligible operations – If you have a qualifying arm (like a tech product), you could set it up as a separate entity that qualifies for EMI.

• Get guidance early – A tax or share scheme specialist can help you structure incentives that won’t backfire.

• Communicate clearly – Make sure employees understand how your plan works and how it compares to EMI.

• Revisit over time – If your business evolves – say, moves from property management into proptech –you might become eligible later.

Final thoughts

The EMI scheme is one of the UK’s most powerful tools for growing companies – but it’s not universal.

HMRC deliberately excludes industries like finance, property, law, agriculture and care homes because they don’t align with EMI’s purpose: rewarding entrepreneurial risk and growth through equity.

If you’d like to review them, our team of experienced equity consultants can guide you through each one. Schedule a consultation today.