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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

Enterprise Management Incentives (EMI): Taxation of EMI options: Options over restricted shares

EMI options can be granted over shares that are restricted or that carry the risk of forfeiture. If this is the case, the shares will have 2 market values at the date of grant, the Actual Market Value (AMV) and the Unrestricted Market Value (UMV). AMV will be the lower of the 2 values.

AMV is the market value of a share after taking into account any restrictions or the risk of forfeiture as set out in the company’s articles of association. Restrictions on the transfer of shares as contained in the articles may be treated as restrictions for this purpose. UMV is the market value of a share ignoring any restrictions and any risk of forfeiture.

Provided that the price to acquire the shares under option is equal to or in excess of the AMV at the date of grant, the options are not regarded as being discounted options and so can be exercised without incurring a charge to tax. UMV at the date of grant is only used for the purpose of the individual and company limits, not for the purpose of establishing a charge to tax.