Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Share option definition

What does Share option mean? A share option is a contractual right to buy (and less commonly to sell) shares at a fixed or formula-based exercise price within a stated period or on specified events. In practice it is a call option over shares, granted either by the company (over unissued shares) or by an existing shareholder (over issued shares). The option gives the holder a right, not an obligation, to acquire the shares; if not exercised before expiry it lapses. The term is descriptive rather than defined in statute or case law, although particular employee share option schemes are defined for tax...

EMI share options (UK): eligibility tests, drafting and operation—common mistakes, disqualifying events, HMRC valuation and notifications, and preserving tax-advantaged status

Published by a LexisNexis Share Incentives expert

Practice notes

Practice Note

While EMI share options can be highly tax‑efficient, they also carry notable traps. Poor drafting or faulty implementation can lead to serious tax consequences for both staff and the business. This Practice Note highlights the most frequent misconceptions and errors when:

determining if a company is eligible to grant EMI options
setting up an EMI scheme, and
running an EMI scheme

Specifically, it explains:

what counts as an EMI option
the fall‑out if an EMI option is drafted or put in place improperly
the impact of mishandling an EMI qualifying option in operation
recurring misunderstandings and errors when testing company eligibility to grant EMI options
recurring misunderstandings and errors when establishing an EMI scheme
recurring misunderstandings and errors when operating an EMI scheme, and
ways to prevent errors and misconceptions when dealing with EMI options

This Practice Note addresses only the common misunderstandings and mistakes concerning EMI options. It is not a comprehensive guide to EMI legislation. For an outline of the main features of EMI schemes, see Practice Note: How EMI schemes work and key features...

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Web page updated on 21/05/2026

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