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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: Disqualifying events relating to the relevant company

The following are disqualifying events relating to the relevant company, i.e. the company whose shares are under option.

Loss of independence is a disqualifying event except where there is a company reorganisation and a qualifying replacement option is granted. If the relevant company becomes a 51% subsidiary of another company, this is not a disqualifying event if a replacement option is granted that satisfies the EMI legislation (Section 534(2) ITEPA).

If the relevant company no longer meets the trading activities requirement it is a disqualifying event.

A company may have originally met the trading activities requirement because it was preparing to carry on a qualifying trade when the option was granted. There is a disqualifying event if these preparations come to a halt, or if the company (or in the case of a parent company of a group, the relevant group company) does not begin to carry on the qualifying trade within two years of the date of grant of the EMI options (Section 534(4) ITEPA).