Partner Article

Tax change to benefit shareholders

A last minute change made to the rules around Enterprise Management Incentives (EMI) will benefit shareholders who have bought shares before the end of the tax year.

EMIs are a share option with tax advantages that help smaller, higher risk companies to bring in and retain employees by helping the business to grow.

The option is often exercised on the point of a company’s sale, so firms sold within the last tax year, or sales that will be completed before 6th April 2013, will be subject to the changes.

Anyone that acquired shares using the EMI option will now qualify for Entrepreneurs Relief (ER), as long as a whole year has passed between when the option was granted and the sale of the shares.

This will be available regardless of whether the relevant employee satisfies the usual 5% shareholding rule for ER.

Martin Benson, a tax partner at Baker Tilly commented: “This will be a pleasant surprise to many of those involved who will have been expecting to have to pay tax at 28% but now may pay only 10%.

“At this stage the law is only in draft and could potentially change before enactment, so the big decision now for many will be whether to wait for the law to come into force this summer before spending the 18% they might save.”

This was posted in Bdaily's Members' News section by Miranda Dobson .