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unexpected Christmas cheer for Enterprise Management Incentive (EMI) option holders

12 December 2012

The draft consultation Finance Bill 2013 was published yesterday. As expected, it removes the requirement for the seller of shares acquired via an EMI option to hold at least 5% of the ordinary shares/voting rights in order to claim entrepreneurs’ relief (ER). Whilst any relaxation of the rules is always welcome, we didn’t think this would help many option holders in practice.

The Bill unexpectedly goes further though by also removing the requirement for the EMI shares to have been owned throughout the 12 months before the sale. If the usual trading/employment tests are met, EMI shares sold from 6 April 2013 (or 6 April 2012 in certain circumstances) could now be eligible for ER – reducing CGT to 10% – provide the option was granted more than 1 year pre-sale.

If the draft legislation isn’t amended, this is fantastic news for the many EMI option holders whose options are exercisable immediately before a company share sale. A hidden legislative change which is positive? Whatever next?

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