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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

HM Revenue & Customs
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Enterprise Management Incentives (EMI): Taxation of EMI options: Tax consequences of exercise of an option following a disqualifying event

A number of changes or developments can disqualify an option from EMI relief. These are called disqualifying events. A disqualifying event restricts tax relief.

If the EMI option is exercised within 90 days (40 days prior to 17 July 2013) of the disqualifying event, the tax advantages are preserved.

If the EMI option is not exercised within 90 days (40 days prior to 17 July 2013) (including occasions when the option is not capable of exercise within this time limit) there will be a tax charge on exercise.

The following are disqualifying events:

  • loss of independence (see ETASSUM57080),
  • the company no longer meets the trading activities requirement (see ETASSUM57080),
  • the employee is no longer eligible (see ETASSUM57090),
  • changes to the terms of the option (see ETASSUM57100),
  • alteration to the share capital of the company (see ETASSUM57110),
  • a conversion of shares (see ETASSUM57120), and
  • grant of a Schedule 4 CSOP option that takes the option holder over the £250,000 limit (see ETASSUM57130).