EMI options in UK company sales: due diligence pitfalls, HMRC compliance, valuations, leavers, BADR and exercise mechanics

Published by a LexisNexis Share Incentives expert

Practice notes

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Background

Enterprise Management Incentives (EMI) are share option arrangements favoured by employers and employees because of their flexibility and the generous tax reliefs they can deliver when administered correctly. These plans frequently permit participants to exercise on a sale, enabling them to dispose of their shares alongside the other shareholders. For businesses, they offer a chance to reward key staff for the effort that helps achieve what will often be a major milestone in the company’s history. For an introduction to the principal features of EMI schemes, their eligibility conditions and tax treatment, see Practice Note: How EMI schemes work and key features. Nevertheless, managing EMI options on a sale (whether advising the buyer or the seller) can be complicated, as a variety of matters may surface during the due diligence process, on either side of the transaction. To benefit from tax-advantaged status, an EMI award must satisfy several strict requirements which need to be met in full. Any doubt over these conditions can result in unfavourable and often unforeseen tax consequences for EMI option holders, leading to commercially challenging conversations for the parties involved and concerned. For examples of the most common pitfalls affecting EMI options and some...

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Claire Prentice

Travers Smith

Claire is a senior associate in Travers Smith's Incentives and Remuneration Group. She advises a wide range of public and private companies, partnerships, trustees and senior executives on all aspects of employee and management incentives, executive remuneration, employment tax and employee benefit trusts. Her practice covers a wide variety of complex, cross-border transactional, advisory and contentious matters.Claire is a member of the Tax Committee of the Share Plan Lawyers Group, a specialist industry association, author of the article "Exercise of discretion in share plans: can discretion ever be absolute?" and a contributing editor of The Legal 500's global publication Employee Share Plans: A Comparative Guide....

Web page updated on 21/05/2026

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