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Understanding EMI Annual Returns: An Essential Guide


The Enterprise Management Incentives (EMI) scheme is a popular UK tax-advantaged share option scheme. It is designed to help smaller, higher-risk companies recruit and retain employees by offering them equity in the business. An important aspect of managing an EMI scheme is the annual return. This article will delve into what EMI annual returns are, what needs to be reported, and their deadlines.

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What are EMI Annual Returns?

EMI annual returns are a mandatory report required by Her Majesty's Revenue and Customs (HMRC). They offer HMRC a detailed snapshot of all EMI option transactions that occurred within a specific tax year. Companies that grant EMI share options are obliged to submit these returns annually.

What Needs to be Reported?

There are several essential details to be reported in the EMI annual return:

  1. Grant of EMI Options: You must report any EMI options granted to employees during the tax year. Details should include the date of grant, the number of shares, the exercise price, and the market value at the time of the grant.
  2. Exercise of EMI Options: You should report when an employee exercises their EMI options, i.e., when they buy shares in the company at the pre-agreed price. Include the exercise date, the number of shares purchased, and the price paid.
  3. Disqualifying Events: Any disqualifying events must be reported. These include events that cause the EMI options to lose their tax-advantaged status, such as the company being taken over or exceeding the gross assets limit.
  4. Cancellation or Expiry of EMI Options: If any EMI options are cancelled or expire during the tax year, these should be reported.
  5. Replacement of EMI Options: If EMI options are replaced with new options due to a company restructure or other reasons, these replacements must be reported.
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EMI Annual Returns Deadline

The tax year in the UK runs from 6th April one year to 5th April the following year. Companies are required to submit their EMI annual returns by 6th July following the end of the tax year. So, for instance, the deadline for the EMI annual return for the tax year ending on 5th April 2023 would be 6th July 2023.

Companies must submit their EMI annual returns online through the Employment Related Securities (ERS) online service. It's important to note that HMRC no longer accepts paper returns. If the return isn't submitted by the deadline, the company may face penalties.

To Summarise

The EMI annual return is a vital part of managing an EMI scheme. It ensures HMRC is kept informed of all EMI option transactions, helping to maintain the tax-advantaged status of the scheme. While it may seem complex, understanding what needs to be reported and when can help simplify the process significantly. As always, if you're unsure about anything, it's wise to seek professional advice to ensure you comply with all HMRC regulations.

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