Why you must grant options from the share class mentioned in the HMRC approval letter.
Once we’ve drafted your company valuation, we send the valuation report and the VAL231 form to HMRC for their approval.
These reports include the number of options you plan to grant and the share class you’re granting them from (you will select a share class when completing our valuation workflow).
When HMRC approve the valuation, they send you a letter which again mentions the chosen share class. You probably see how all this ties together now…
But if you haven’t already, you will then create the option pool where the options will be granted from.
This option pool must use shares from the chosen share class, because when you come to grant the EMI options to your employees, each option agreement will state the share class.
The good news is that Vestd makes the process simple, as when you’re creating the option pool you will clearly see the share class to use. And while it may sound obvious, it’s essential you create the share class before granting options too.
So if there is a mismatch between the share class on the HMRC approval letter and the EMI option agreement, this can raise a few issues – especially if each share class has different class particulars.
If there isn't a difference in the class particulars, there is a lower risk that HMRC will challenge this, but please note that HMRC reserves the right to challenge the approval letter at any point, which could result in the EMI options losing their tax benefits.
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