If you are considering creating an EMI options scheme, you may be concerned that this process of rewarding your team represents a lot of time, complicated paperwork, and difficult back-and-forth communication with HMRC.
So we know from experience that if your business has the proper resources, support, and guidance, you can set up a scheme that’s compliant from the very start, and reward your team with the shares they deserve for a job well done.
This 10-minute guide will teach you the six steps to setting up an EMI scheme. While there’s plenty to take in and no shortcuts to success, we’ll show how you can get help with the process – and avoid any potential pitfalls that may arise along the way.
The six steps to creating an EMI options scheme
Here is the process we share with businesses for creating an EMI options scheme:
This diagram shows the steps you’ll take to ensure your organisation’s EMI options scheme is created properly and is eligible to qualify as an EMI with HMRC upon registration:
Establish your eligibility
Create the scheme
File for valuation with HMRC
Authorise your share pool and receive approval internally
Grant EMI options to employees
Register the scheme with HMRC
Let’s go through these steps in order so you understand what you need to do at each stage, and who to contact for help if you get stuck or have questions about compliance.
1. Establish your eligibility for an EMI share scheme
Creating the scheme at this stage will prepare you for the next steps in the process, including filing for valuation and receiving approval from your board and shareholders. It will also help you better prepare to answer questions from your team.
You will eventually register with HMRC, but not yet: there are a few other crucial steps to take first.
3. File for valuation with HMRC
At this stage, you will need to file with HMRC to receive a valuation of your business. This process typically takes between two and four weeks from start to finish.
Recipients of EMI options are confident of their value at the time of exercise because they are backed by a written valuation by HMRC.
Filing for valuation provides some certainty regarding tax treatment going forward for both the business and employees, as long as all due criteria and processes are followed.
To proceed, you should first have a valuation report carried out for your company. You can either do this yourself with the help of an accountant or if you are working with us here at Vestd, we will do it for you.
Once you have the report, submit it to HMRC via email or post along with a completed VAL231 form. You can find both the VAL231 form and instructions for submission on this page.
This valuation is valid for 90 days from the time HMRC approves it, which will happen via letter. Once you have received it, you are ready to move on to the next step.
4. Authorise your share pool, and receive approval from your board or shareholders
With your valuation in hand, you should now create the share pool from which you will issue EMI options to your team.
Your employees will likely want to know why you have chosen an EMI share scheme, and how it will benefit them. They may also have some questions about the tax implications of their options, or how to exercise them in the future.
You’ve reached the final step — congratulations! After granting options to your team, you are now finally ready to register your EMI scheme and its granted options with HMRC. This step must be done within 92 days of any option grants.
However, we typically recommend that our customers start this initial notification process at least two weeks before the end of the 92-day period; there are multiple steps required, and HMRC may not respond to your registration or any questions immediately.
The process of registering is as follows:
Register your EMI options scheme by following the steps on this page.
Within seven days of notification, you will receive a response from HMRC
Using the scheme you set up previously, notify HMRC about individual employee option grants. Instructions for notifying HMRC about your option grants (both initial or future grants)can be found here.
HMRC will confirm that they have received your option grant notifications.
Once you’ve received confirmation that HMRC has received your option grant notifications, you are done with the process. Your EMI scheme is now fully established and ready for operation at your organisation.
How to manage an EMI option scheme
Now that you know the six steps you should take to create a compliant EMI share scheme, you are almost ready to get started.
But setting up the scheme isn’t everything. You also need a good tool to help you manage it. There’s ongoing administration to consider: notifications to HMRC, maintaining vesting schedules, adding and removing option holders, and so on.
You’ll need advice on how to stay compliant if the size or shape of your company changes, and help to keep accurate records of what’s been issued and left in your employee share pool.
This is what we offer here at Vestd. With a simple monthly subscription, we’re able to help you efficiently and accurately manage an EMI scheme over its lifetime, ensuring compliance at every step of your journey.
Our team has set up and optimised hundreds of EMI schemes for UK businesses just like yours — businesses that want to easily reward their team with options, not burden them with headaches and tax forms.
Book a demo with us nowto learn how Vestd can help you create and manage a stress-free, fully compliant and cost-effective EMI scheme.