Employee shares tax break given EC backing

Ministers say they have secured the long-term future of a tax break for burgeoning businesses.

Enterprise Management Incentives (EMI) – which are designed to help small and medium-sized, high-growth companies to recruit and retain skilled employees – have been given state aid approval by the European Commission. 

EMI provide a tax break on up to £120,000-worth of share options offered by SMEs to their members of staff. They play a crucial role in enabling firms to recruit and retain the highly skilled employees needed to thrive, claimed the Treasury.

The eligibility criteria are also to be widened, so that UK-based businesses that carry out considerable overseas activity can use EMI to recruit key workers. The change will be legislated in Finance Bill 2010 and is anticipated to take effect from 6 April 2010.

The EC approval, which will last until 2018, is hoped to provide a boost to the 9,000 companies that currently offer share options to their employees under EMI. It is likely to encourage take-up among high-growth small firms that will play a vital role in the return to growth in the UK economy, said the Government.

The economic secretary to the Treasury, Ian Pearson, added: ‘We are confident that EMI will continue to act as a valuable tool in ensuring the growth of SMEs in the UK.’

In 2007/08, the latest year for which data is available, 2,830 companies issued share options under EMI to 26,400 employees. The initial value of the shares over which share options were granted was £300 million, while the total number of firms operating EMI was 9,110. The tax relief granted amounted to £240 million.

Issue: 4220 / Categories: News , Business , Income Tax