9 July 2012
Press ReleasesHMRC last week (27 June) launched a consultation seeking views on a proposed extension to the Enterprise Management Incentives (EMI) Option scheme to benefit academic employees of qualifying spin-out companies who do not currently meet its working time requirement.
The consultation presents a significant future opportunity for academics and other researchers to receive EMI share options and could bring far-reaching benefits, says accountants and business advisers James Cowper Kreston.
Popular with high risk companies, EMIs enable employees to have access to future growth in the value of a company and do not require HMRC approval before share options can be issued. They can be a crucial recruitment tool that secures access to the research and development expertise that businesses need.
Sharon Bedford, Business Tax Partner at James Cowper Kreston LLP said: “Academics play a vital part in the success of spin-out companies, but, as they often have to juggle this with their research and teaching commitments it is difficult to meet the conditions for EMI. A relaxation of the current rules for academics would be very welcome by them and the companies. By increasing the incentives available it is hoped that more research will be spun-out boosting growth and jobs, increasing UK plc’s competitive edge. It may also encourage more academics to get involved with existing companies working in their field.”
Employees must meet certain conditions to qualify under EMI and the consultation is focused on the amount of working time an individual commits to the business.
Sharon explains: “The Government is looking at whether an appropriate way to amend the legislation can be found that allows employers to offer an EMI option where academic employees do not satisfy the EMI working time requirement. Currently to receive an EMI option an employee must work at least 25 hours a week or 75 per cent of their time on the business. Inevitably it can be difficult for academics to fulfil this requirement if they also work for a university, for example. Under the proposals, the 25 hours a week could instead be made up of the combined average hours they are employed by the EMI company and carrying out associated research at a research institution.”
Sharon added: “James Cowper Kreston, who have a high proportion of spin out and other cutting edge technology companies within their client base, will be discussing HMRC’s proposals with their clients and professional contacts and plans to make representations on a host of issues.”
Replies to the consultation are invited by 18 September 2012 and details of the Government’s response will be published in the autumn. Before implementation, the proposal would be subject to state aid clearance by the European Commission.
Sharon Bedford, Partner, James Cowper Kreston LLP, Tel +44 (0)1865 861166 or email
