EMI State Aid Uncertainty Will Impact Scottish Start-ups

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Following the UK Government’s update last week that there will be a lapse in EU State Aid for the Enterprise Management Initiative (EMI) scheme, Andrew Holloway, Head of Entrepreneurial Taxes at Johnston Carmichael, Scotland’s largest independent firm of Chartered Accountants and Business Advisers, reflects on the implications for Scottish start-ups.

Andrew Holloway, Headf of Entrepreneurial Taxes, Johnston CarmichaelUncertainty over the renewal of EU State Aid approval for the HMRC approved Enterprise Management Incentive (EMI) scheme could have a significant impact on young and entrepreneurial businesses across Scotland.

On 4 April 2018, the UK Government – via its Employment Related Securities (ERS) bulletin – updated firms involved in establishing EMI schemes and the granting of EMI share options, that there will be a lapse period from when the existing approval expired on 6 April 2018, until a decision is reached by the EU Commission on a fresh approval.

As a result of this delay, those companies seeking to work through the process leading to the granting of EMI share options may face delays from 7 April until EU State Aid is approved. Options granted on or after that date may not be eligible for the attractive tax treatment that EMI share options currently benefit from, with HMRC noting that options granted when approval has not been granted may fall to be treated as non-tax advantaged options.

Any move jeopardising the initiative could have a significant impact on younger entrepreneurial companies looking to incentivise staff, particularly in Scotland’s burgeoning technology sector.

EMI is fundamental to the competitiveness of many entrepreneurial businesses in Scotland, as it levels the playing field in helping up-and-coming firms attract the best talent. The current uncertainty could present a problem for Scotland’s growing technology companies, as well as many others. While we hope and expect that approval from the EU will be provided as soon as possible, in the context of Brexit it is perhaps not a surprise that there are delays.

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