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HMRC internal manual

Shares and Assets Valuation Manual

Tax Advantaged Share Schemes: Enterprise Management Incentives (EMI)

EMI is an unapproved share option scheme.

Guidance is available in the Employee Tax Advantaged Share Scheme User Manual at ETASSUM50000.

A qualifying employee of a qualifying company may hold unexercised tax advantaged share options (EMI and CSOP) with an unrestricted market value (UMV) of up to £250,000. The £250,000 limit applies from 16 June 2012; with a previous limit of £120,000 from 6 April 2008 and a £100,000 limit before that, subject to a total value of £3 million for all employees.

The UMV is the value of shares without taking into account any restrictions or risk of forfeiture.

A form Val 231 is available to enable applicants to apply for a valuation check. We will consider a check before the options are granted and during the 12 months and 92 days after the options have been granted.

The form Val 231 requires the applicant to indicate the proposed share value where there are restrictions - the actual market value (AMV) - and to state the proposed share value, without taking any such restrictions into account - the UMV.

The AMV and UMV should always be considered. However, it is sometimes suggested by applicants that restrictions, such as those on transfer, do not depreciate value. The same price for both AMV and UMV is therefore proposed. Both values do not need to be agreed provided the price agreed represents at least UMV and options are granted at that price. There is then no need to agree an AMV.

We can consider a request for an agreed value after the options have been granted, but only while the enquiry window remains open. The grant of options must be reported to the Small Companies Enterprise Centre (SCEC) on form EMI1 within 92 days of the date of grant. The enquiry window is open for a year after that. This means SAV can only consider customers’ requests for an agreed valuation for up to fifteen months after the date of grant.

A form Val 215 should be completed and returned to the SCEC where the parties approach us to agree a value AFTER options have been granted AND where we subsequently negotiate a revised price to that originally put forward in the notification to the SCEC. There is no need to complete a Val 215 in any other circumstances. The completed Val 215 should be sent by email to the designated person at the SCEC.

Under the SCEC’s risk assessment procedures, appropriate cases will be referred to SAV for advice. These referrals should be dealt with in the same way as any other informal valuation, in other words acknowledgements sent and information gathered from our internal sources. The SCEC will attach a copy of the return form (EMI 1 or form 40), which will have details of the number of options issued and the proposed values. Where possible, copies of the company’s latest accounts in the Corporation Tax (CT) file will be attached. If thought helpful by the SCEC, the CT file may on occasion be sent. The SCEC will indicate any deadlines and also the nature of their concerns.

Valuers should provide their informal and not negotiated values to the SCEC by memo/email and close the file in the same way as other informal valuations. The SCEC will then consider whether or not to issue an EMI enquiry notice. If an enquiry notice is issued, a further memo will then be sent to us, attaching a copy of the notice asking us to formally agree values with the parties.

Where a notice is received from the company requiring the question of the market value of the shares to be referred to the relevant tribunal, the case should be referred to an Assistant Director.

  Additional Guidance:SVM150000