Guidance

Enterprise Management Incentives: guidance notes

Updated 26 March 2024

1. Guide to completing Enterprise Management Incentives (EMI) annual return attachment

The company secretary or the person acting as the company secretary must complete an online end-of-year return on or before 6 July for each registered EMI scheme.

The EMI attachment only needs to be completed and then uploaded where there are outstanding qualifying options and there has been activity in the tax year.

You will need to complete an online ‘nil’ return if there are no outstanding qualifying options but you have registered the scheme, or there are outstanding qualifying options but there has been no activity in the tax year.

Complete only the worksheets that are relevant but upload the whole workbook, including any blank sheets. If you change the structure or formatting of your attachment it will be rejected.

If you have created your own comma separated values (CSV) files using the HMRC technical note, upload each CSV file that contains data relevant to that scheme type. The comma separated values template you have created must accurately match the exact wording on the HMRC technical notes. You must make sure all punctuation and grammar is matched. If the column does not accurately match the technical specification, it will not be possible to submit the file successfully.

You can use the employment related securities (ERS) checking service to check your attachment. The checking service will tell you if and where there are any formatting errors in your attachment. You can use the checking service as often as you like. Checking your attachments regularly allows you to identify and correct these errors. This makes it easier to submit your return at the end of the year. The checking service is accessed through ‘view my schemes and arrangements’ on the online ERS service.

1.1 General guidance on valuations

All values should be entered in pounds sterling and pence and entered to 4 decimal places. Where necessary, round up figures ending in 5 or more and round down figures ending in 4 or less. You should use any reputable currency convertor to convert to pounds sterling if the value is quoted in another currency.

There is no change in valuation practice with the introduction of the templates. It is not necessary to have formally agreed the valuation of shares and securities with HMRC. However, where shares are not listed on a recognised stock exchange, you may have asked for a valuation from HMRC. If you agreed a valuation with HMRC then provide the reference number on the attachment. If the number is prefixed with Company Reference Number (CRN) do not enter those letters. If you did not get a valuation you should continue to retain records of how you reasonably established the valuation.

1.2 Actual Market Value (AMV)

AMV is the value of a share or security after taking into account any restrictions or risk of forfeiture.

1.3 Unrestricted Market Value (UMV)

UMV is the value of a share or security ignoring any restrictions or risk of forfeiture.

1.4 Recognised stock exchange

AIM is not a recognised stock exchange. For more information For more information about recognising stock exchange read Recognised stock exchanges: definition, legislation and tables.

You must use the required formats when answering a question or a column requires an entry. If a question does not apply or is not mandatory, leave the entry blank.

Entering ‘N/A’ or ‘not applicable’ will result in your attachment being rejected. You can read the technical notes to find out if a field is mandatory, conditional mandatory or optional and explain the formatting required for each question.

Where a question or column requires a YES/NO entry, the following formats are acceptable:

• Yes
• yes
• YES
• No
• no
• NO

2. Common fields on all worksheets

These fields appear across different worksheets of the EMI template. This guidance will help you give HMRC the correct information.

2.1 Nature of the disqualifying event

Enter a figure from 1 to 8 to tell HMRC which of the following statements is correct:

1. Company has come under control of another company. Loss of independence is a disqualifying event unless it’s because of a company re-organisation. For this there is a qualifying replacement option.
2. Company has stopped meeting the trading activities requirement.
3. The option holder has stopped meeting the working time requirement. Employees are only eligible for EMI options if they’re working as an employee of the company whose shares are subject to the EMI option or for a qualifying subsidiary. Employees must either work at least 25 hours each week or, if they work less, 75 per cent of their working time.
4. The terms of the option have changed causing the value of the shares to increase or the option to no longer be a qualifying option.
5. A change in share capital which results in a disqualifying event. This involves the creation, change or removal of a right or restriction which applies to the shares and this change is not for commercial reasons or the change in share capital is made to increase the value of the shares.
6. Shares were converted into a different class of shares and this conversion did not happen to the whole class of shares.
7. The option holder now holds more than the maximum entitlement of EMI and Company Share Option Plan (CSOP) options over shares with an unrestricted market value (UMV) as they have been granted an option under a CSOP. There is a disqualifying event when an employee is granted a Schedule 4 Company Share Option Plan option on top of unexercised CSOP and EMI options taking the employee beyond the £250,000 limit on holding options over shares.
8. The company has not started to carry on a qualifying trade within two years of the grant of the option or preparations to carry on a qualifying trade have ended. Further guidance on disqualifying events can be found in the Employee Tax Advantaged Share Scheme User Manual.

2.2 Exercise price per share

Enter the price at which the employee was granted the option. It’s the price the employee will pay for each share on the exercise of the option.

3. EMI40_Adjustments_V4 worksheet

Use this worksheet to tell HMRC about options that have been adjusted in the tax year.

3.1 Question 1: has there been any adjustment of options following a variation in the share capital of the company? (yes/no)

When an adjustment is made to a company’s share capital, there is normally:

• an adjustment to the number of shares in issue
• an adjustment to the value of the shares
• a combination of the above

This will affect the option granted and the exercise price of each share under option.

3.2 Question 2: has there been a change to the description of the shares under option? (yes/no)

Enter ‘yes’ if the description of the shares has changed because of the adjustment.

3.3 Question 3: is the adjustment a disqualifying event? (yes/no)

See the descriptions of disqualifying events on page 2 of this guide.

Enter ‘yes’, if one of them applies.

Enter ‘no’, if none applies and skip question 4.

3.4 Question 4: if yes, enter a number from 1 to 8 depending on the nature of the disqualifying event

See the descriptions of disqualifying events on page 2 of this guide and enter a number.

3.5 Question 5: date option adjusted (yyyy-mm-dd)

Enter the date the option adjustment was made.

3.6 Question 6: employee first name

Enter employee’s first name.

3.7 Question 7: employee second name (if applicable)

If the employee’s second name is not available then do not make any entry in this column.

3.8 Question 8: employee last name

Enter employee’s last name.

3.9 Question 9: National Insurance number

In most cases, Individuals included on an ERS end of year return should have a National Insurance number (NINO). However, there may be some exceptional circumstances where an individual needs to be included on a return but does not have a NINO. In these circumstances, an alternative reference should only be used on the ERS end of year return; it should not be used in any other correspondence.

This reference is not a NINO and should not be given to the individual or used in any other correspondence with HMRC.

Where there are exceptional circumstances, the required format for the alternative ERS reference will be a total of 9 characters. This will be 2 letters, 6 numbers and 1 letter consisting of:

• TN ― to indicate an ERS reference
• Employee Date of Birth in format DDMMYY (for example, 080403) ― this data will enable HMRC to trace the individual
• No NINO Reason Identifier (X, Y or Z) ― this is to identify the reason why an individual does not have a NINO
• X ― Under 16 years old
• Y ― Applied for a National Insurance number and is waiting to receive it
• Z ― Never paid National Insurance contributions (NICs) as they haven’t been liable to UK NICs, for example they’re not resident in the UK or are an ‘intra-company worker’ on transfer to work in the UK

3.10 Question 10: PAYE reference of employing company

Enter the PAYE reference number of the employee’s employing company. The employing company should be the company that has the PAYE obligation.

3.11 Question 11: exercise price per share under option before adjustment example 10.1234

Enter the price, to 4 decimal places, the employee would have paid for the shares before the adjustment was made.

3.12 Question 12: number of shares under the option after adjustment example 100.00

Enter the total number of shares under the option in figures and to 2 decimal places after the adjustment was made.

3.13 Question 13: exercise price per share under option after the adjustment in pound sterling example 10.1234

Enter the exercise price following the adjustment. It is the price the employee will pay for each share on the exercise of the share option. This should be to 4 decimal places.

3.14 Question 14: actual market value of shares at the date of grant example 10.1234

Enter the actual market value of the EMI shares at the date of grant before the adjustment was made. This should be to 4 decimal places. AMV is the value of a share or security after taking into account any restrictions or risk of forfeiture.

4. EMI40_Replaced_V4 worksheet

Use this worksheet to tell HMRC about options replaced because of a company re-organisation in the tax year.

4.1 Question 1: date of grant of old option (yyyy-mm-dd)

Date the original EMI option was granted to the employees. If several EMI options are being replaced by a single grant of an EMI option then enter the date of the oldest EMI option being replaced.

4.2 Question 2: date of grant of new option (yyyy-mm-dd)

Enter the date replacement EMI options were granted to the employees.

4.3 Question 3: employee first name

Enter the employee’s first name.

4.4 Question 4: employee second name (if applicable)

If the employee’s second name is not available then do not make any entry in this column.

4.5 Question 5: employee last name

Enter the employee’s last name.

4.6 Question 6: National Insurance number

In most cases, Individuals included on an ERS end of year return should have a National Insurance number (NINO). However, there may be some exceptional circumstances where an individual needs to be included on a return but does not have a NINO. In these circumstances, an alternative reference should only be used on the ERS end of year return; it should not be used in any other correspondence.

This reference is not a NINO and should not be given to the individual or used in any other correspondence with HMRC.

Where there are exceptional circumstances, the required format for the alternative ERS reference will be a total of 9 characters. This will be 2 letters, 6 numbers and 1 letter consisting of:

• TN ― to indicate an ERS reference

• Employee Date of Birth in format DDMMYY (for example, 080403) ― this data will enable HMRC to trace the individual

• No NINO Reason Identifier (X, Y or Z) ― this is to identify the reason why an individual does not have a NINO

• X ― Under 16 years old

• Y ― Applied for a National Insurance number and is waiting to receive it

• Z ― Never paid National Insurance contributions (NICs) as they haven’t been liable to UK NICs, for example they’re not resident in the UK or are an ‘intra-company worker’ on transfer to work in the UK

4.7 Question 7: PAYE reference of employing company

This is the PAYE reference number of the employee’s employing company. The employing company should be the company that has the PAYE obligation.

4.8 Question 8: actual market value of original shares at the date the option(s) were replace example 10.1234

Enter to 4 decimal places the AMV of a share after taking into account any restrictions or risk of forfeiture at the date of the original EMI option grant.

4.9 Question 9: name of the company whose shares are the subject of the new option

Enter the name of the company whose shares are used to grant the new EMI option.

4.10 Question 10 to 15: provide address details of the company whose shares are the subject of the new option

4.11 Question 16: Corporation Tax reference number (Unique Taxpayer Reference)

This is 10 numbers long and issued to the company by HMRC for Corporation Tax purposes.

4.12 Question 17: Company Reference Number (CRN)

This is the specific number issued by Companies House to UK registered companies. If the company is not UK registered or does not have this number then do not make any entry in this column.

5. EMI40_RLC_V4 worksheet

Use this worksheet to tell HMRC about options released, lapsed or cancelled in the tax year.

5.1 Question 1: date of event (yyyy-mm-dd)

Enter the date the option was released (including exchanges), lapsed or cancelled.

5.2 Question 2: is the release, lapse or cancellation the result of a disqualifying event? (yes/no)

See the descriptions of disqualifying events on page 2 of this guide.

Enter ‘yes’, if one of them applies.

Enter ‘no’, if none applies and skip question 3.

5.3 Question 3: if yes, enter a number from 1 to 8 depending on the nature of the disqualifying event

See the descriptions disqualifying events on page 2 of this guide and enter a number.

5.4 Question 4: employee first name

Enter the employee’s first name.

5.5 Question 5: employee second name (if applicable)

If the employee’s second name is not available then do not make any entry in this column.

5.6 Question 6: employee last name

Enter the employee’s last name.

5.7 Question 7: National Insurance number

In most cases, individuals included on an ERS end of year return should have a National Insurance number (NINO). However, there may be some exceptional circumstances where an individual needs to be included on a return but does not have a NINO. In these circumstances, an alternative reference should only be used on the ERS end of year return; it should not be used in any other correspondence.

This reference is not a NINO and should not be given to the individual or used in any other correspondence with HMRC.

Where there are exceptional circumstances, the required format for the alternative ERS reference will be a total of 9 characters. This will be 2 letters, 6 numbers and 1 letter consisting of:

• TN ― to indicate an ERS reference

• Employee Date of Birth in format DDMMYY (for example, 080403) ― this data will enable HMRC to trace the individual

• No NINO Reason Identifier (X, Y or Z) ― this is to identify the reason why an individual does not have a NINO

• X ― Under 16 years old

• Y ― Applied for a National Insurance number and is waiting to receive it

• Z ― Never paid National Insurance contributions (NICs) as they haven’t been liable to UK NICs, for example they’re not resident in the UK or are an ‘intra-company worker’ on transfer to work in the UK

5.8 Question 8: PAYE reference of employing company

Enter the PAYE reference number of the employee’s employing company. The employing company should be the company that has the PAYE obligation.

5.9 Question 9: number of shares subject to the option which have been released, lapsed or cancelled

Enter the number to 2 decimal places and not the value of shares under option that were released (including exchanges), cancelled or lapsed for which option can no longer be exercised.

5.10 Question 10: was money or value received? (yes/no)

This includes anything that:

• is of direct monetary value to the employee

• can be converted into money or something of direct monetary value to the employee

If ‘yes’, complete questions 11 and 12.

If ‘no’, no more information is needed for this event.

5.11 Question 11: If yes enter the amount example 10.1234

Enter in figures to 4 decimal places the amount given to the employee for the release (including exchanges), lapsing or cancelled of their EMI option.

5.12 Question 12: PAYE operated? (yes/no)

PAYE should have been operated if the shares are readily convertible into cash. There are exceptions example following death. Enter ‘yes’ or ‘no’ in this field.

6. EMI40_NonTaxable_V4 worksheet

Use this worksheet to tell HMRC about any non-taxable exercises of options in the tax year.

6.1 Question 1: date of option exercise (yyyy-mm-dd)

Enter the date the option was exercised by the employee.

6.2 Question 2: employee first name

Enter the employee’s first name.

6.3 Question 3: employee second name (if applicable)

If the employee’s second name is not available then do not make any entry in this column.

6.4 Question 4: employee last name

Enter the employee’s last name.

6.5 Question 5: National Insurance Number

In most cases, individuals included on an ERS end of year return should have a National Insurance number (NINO). However, there may be some exceptional circumstances where an individual needs to be included on a return but does not have a NINO. In these circumstances, an alternative reference should only be used on the ERS end of year return; it should not be used in any other correspondence.

This reference is not a NINO and should not be given to the individual or used in any other correspondence with HMRC.

Where there are exceptional circumstances, the required format for the alternative ERS reference will be a total of 9 characters. This will be 2 letters, 6 numbers and 1 letter consisting of:

• TN ― to indicate an ERS reference

• Employee Date of Birth in format DDMMYY (for example, 080403) ― this data will enable HMRC to trace the individual

• No NINO Reason Identifier (X, Y or Z) ― this is to identify the reason why an individual does not have a NINO

• X ― Under 16 years old

• Y ― Applied for a National Insurance number and is waiting to receive it

• Z - Never paid National Insurance contributions (NICs) as they haven’t been liable to UK NICs ― for example they’re not resident in the UK or are an ‘intra-company worker’ on transfer to work in the UK

6.6 Question 6: PAYE reference of employing company

Enter the PAYE reference number of the employee’s employing company. The employing company should be the company that has the PAYE obligation.

6.7 Question 7: total number of shares employee entitled to on exercise of the option before any cashless exercise or other adjustment example 100.00

Enter the number of shares to 2 decimal places the employee is entitled to acquire from this exercise. State the gross number of shares and ignore shares withheld to pay for tax and National Insurance Contribution (NIC) or the exercise price.

For example, an employee has options over 200 shares and choses to exercise the option to acquire 100 shares. Forty of those shares are withheld to pay for the employee’s income tax and NIC liability. You enter 100 in this field.

6.8 Question 8: AMV of a share on the date of grant of the options exercised example 10.1234

Enter the AMV of a share or security after taking into account any restrictions or risk of forfeiture.

6.9 Question 9: exercise price per share example 10.1234

Enter the price at which the employee was granted the option. It is the price the employee will pay for each share on the exercise of the share option.

6.10 Question 10: AMV of a share at date of exercise example 10.1234

Enter the AMV of a share or security after taking into account any restrictions or risk of forfeiture.

6.11 Question 11: are the shares subject to the option exercised listed on a recognised stock exchange? (yes/no)

AIM is not a recognised stock exchange. For more information, go to Recognised stock exchanges.

If you enter ‘no’, go to question 12.

If you enter ‘yes’, go to question 14.

6.12 Question 12: if no, was the market value agreed with HMRC? (yes/no)

The market value of shares under EMI options can be agreed with HMRC in advance of the date of grant of options.

6.13 Question 13: if yes, enter the HMRC valuation reference given

The HMRC reference will be on the valuation letter sent to you from the Shares and Assets Valuation office. The reference given will normally be your Company Reference Number (CRN). Enter the full reference including the letters and numbers. If the beginning of your reference has three letters, only include the numbers.

6.14 Question 14: total amount paid for shares example 10.1234

Enter the amount paid by the employee to acquire the shares.

6.15 Question 15: were all shares resulting from the exercise sold? (yes/no)

Enter ‘yes’ if shares were immediately sold on exercise or instructions were given to sell on exercise. The application of a price limit should be disregarded. If any shares were retained or at a later point the employee decides they now want to sell the shares enter ‘no’.

7. EMI40_Taxable_V4 worksheet

Use this worksheet to tell HMRC about taxable exercises of options in the tax year.

7.1 Question 1: date option exercised (yyyy-mm-dd)

Enter the date option was exercised by the employee.

7.2 Question 2: is this as a result of a disqualifying event? (yes/no)

See the descriptions disqualifying events on page 2 of this guide.

Enter ‘yes’ if one of them applies.

Enter ‘no’ if none applies and skip question 4.

7.3 Question 3: if yes, enter a number from 1 to 8 depending on the nature of the disqualifying event.

See the descriptions of disqualifying events on page 2 of this guide and enter a number.

7.4 Question 4: employee first name

Enter the employee’s first name.

7.5 Question 5: employee second name (if applicable)

If the employee’s second name is not available then do not make any entry in this column.

7.6 Question 6: Employee last name

Enter the employee’s last name.

7.7 Question 7: National Insurance number

In most cases, individuals included on an ERS end of year return should have a National Insurance number (NINO). However, there may be some exceptional circumstances where an individual needs to be included on a return but does not have a NINO. In these circumstances, an alternative reference should only be used on the ERS end of year return; it should not be used in any other correspondence.

This reference is not a NINO and should not be given to the individual or used in any other correspondence with HMRC.

Where there are exceptional circumstances, the required format for the alternative ERS reference will be a total of 9 characters. This will be 2 letters, 6 numbers and 1 letter consisting of:

• TN ― to indicate an ERS reference

• Employee Date of Birth in format DDMMYY (for example, 080403) ― this data will enable HMRC to trace the individual

• No NINO Reason Identifier (X, Y or Z) ― this is to identify the reason why an individual does not have a NINO

• X ― Under 16 years old

• Y ― Applied for a National Insurance number and is waiting to receive it

• Z ― Never paid National Insurance contributions (NICs) as they haven’t been liable to UK NICs, for example they’re not resident in the UK or are an ‘intra-company worker’ on transfer to work in the UK

7.8 Question 8: PAYE reference

Enter the PAYE reference number of the employee’s employing company. The employing company should be the company that has the PAYE obligation.

7.9 Question 9: total number of shares employee entitled to on exercise of the option before any cashless exercise or other adjustment, for example 100.00

Enter to 2 decimal places the number of shares employee is entitled to acquire from this exercise. This is the gross number of shares and ignoring shares withheld to pay for tax and NIC or the exercise price.

For example, an employee has options over 200 shares and choses to exercise the option to acquire 100 shares. Forty of those shares are withheld to pay for the employee’s income tax and NIC liability. You enter 100 in this field.

7.10 Question 10: AMV of a share at date of grant example 10.1234

Enter the AMV to 4 decimal places of a share or security after taking into account any restrictions or risk of forfeiture.

7.11 Question 11: exercise price per share example 10.1234

Enter the price at which the employee was granted the option. It is the price the employee will pay for each share on the exercise of the share option. This should be to 4 decimal places.

7.12 Question 12: AMV of a share date of exercise example 10.1234

Enter the AMV to 4 decimal places of a share or security after taking into account any restrictions or risk of forfeiture.

7.13 Question 13: UMV of a share at date of exercise in pound sterling example 10.1234

Enter the UMV of a share or security to 4 decimal places ignoring any restrictions or risk of forfeiture.

7.14 Question 14: total amount paid for the shares in pound sterling example 10.1234

Enter the total amount to 4 decimal places the employee paid for the shares.

7.15 Question 15: is the company listed on recognised stock exchange? (yes/no)

If you enter ‘no’, read question 16.

If you enter ‘yes’, read question 18.

7.16 Question 16: has the market value agreed with HMRC? (yes/no)

The market value of shares under EMI options can be agreed with HMRC in advance of the date of grant of options.

7.17 Question 17: if yes, enter the HMRC valuation reference number

The HMRC reference will be on the valuation letter sent to you from the Shares and Assets Valuation office. The reference given will normally be your Company Reference Number (CRN). Enter the full reference including the letters and numbers. If the beginning of your reference has three letters, only enter the numbers.

7.18 Question 18: has an election under Section 431 (1) been made to disregard restrictions? (yes/no)

Under the employment-related securities tax legislation it is possible for an employer and employee to enter into what is called a Section 431 (1) election. The effect of a section 431 election is to disregard all or some restrictions depending on how it is made.

7.19 Question 19: has a National Insurance Contribution election or agreement been operated (yes/no)

This is when the employer and the employee agree or jointly elect for the employee to meet the employer’s liability to pay secondary NICs on certain types of share awards and share options gains. The employee can then get a deduction equal to the amount of secondary or employers’ NICs transferred when working out the amount chargeable to income tax.

7.20 Question 20: amount subjected to PAYE example 10.1234

Enter the amount put through the payroll for PAYE to 4 decimal places.