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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

From
HM Revenue & Customs
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Enterprise Management Incentives (EMI): Eligible employees: Material interest examples

Example 1

Material interest and shares under a Schedule 4 CSOP option;

 

 

01/01/2007 Issued ordinary share capital 1000 shares
     
  Shares held by employee A 50 shares
  Options held by employee A Nil
  A has interest in 5% - 50/1000; therefore not a material interest  

 

 

01/02/2007 Schedule 4 CSOP option granted to employee A over 500 shares
   
  To be satisfied by new issue shares

 

The grant on 01/02/2007 gives employee A:

  • An interest in 550 shares (50 + 500)
  • Out of a total of 1500 shares (1000 + 500 new issue shares)

This is an interest of 36.66% which is a material interest

This would prevent employee A being granted any EMI options.

 

Example 2

Material interest and shares under tax advantaged EMI options;

 

 

01/01/2007 Issued ordinary share capital 1000 shares
     
  Shares held by employee A 50 shares
  Options held by employee A nil
  A has interest in 5% - 50/1000; therefore not a material interest  

 

 

01/02/2007 EMI option granted to employee A over 500 shares
   
  To be satisfied by new issue shares

 

The grant on 01/02/2007 gives employee A:

  • An interest in 550 shares (50 + 500)
  • Out of a total of 1500 shares (1000 + 500 new shares)

EMI options are not taken into account for the material interest test. For the purpose of this test, A’s interest is 50 shares out of a total of 1000 shares. His interest remains at 5% and he can therefore be granted further EMI options.