HMRC has published additional guidance on its expectations as to the content of EMI option agreements, which seems to go beyond the recently simplified legislation. 

The legislative requirement for EMI option agreements to contain details of any restrictions on the option shares in order for the options to qualify for EMI treatment has been removed for EMI options exercised on or after 6 April 2023.

In conjunction with this change, part of HMRC’s EMI option guidance has been updated to confirm that employers are no longer required to detail within their EMI option agreements the details of any restrictions on the option shares.

However, HMRC stated in its 50th Employment-Related Securities (ERS) Bulletin (published on 11 May 2023) that it is still necessary for an employee to be aware of all the terms of the option before entering into the option agreement, including any restrictions on the shares that can be acquired.

As such, notwithstanding the recent change in legislation and HMRC guidance, and until HMRC provide some clarification, companies granting EMI options are recommended to ensure that any restrictions on the EMI option shares are clearly flagged to the option holder in the option agreement, and the full terms are available to the option holder to view before grant.

For a summary of other changes to the EMI option legislation from 6 April 2023, please click here.

If you would like to speak with a member of our team about your company’s EMI option scheme, please contact Kathy Granby or Matthew Rowbotham.

[This article was updated to reflect changes in HMRC guidance in September 2023]