If you hold EMI options and are considering exercising them before 5 April 2012, you may wish to consider the proposed changes in the rules concerning CGT entrepreneurs' relief for shares acquired through the exercise of an EMI option after that date contained in the Budget.
Entrepreneurs' relief enables employee shareholders of companies to sell their shares at the highest CGT marginal rate of 10% (as opposed to the usual 28%) for gains of up to £10,000,000.
There are detailed rules concerning qualifying for entrepreneurs' relief. One important rule is being relaxed. It is generally a requirement that the disposer holds 5% of the shares of the company at the time of disposal. This rule is being waived for shares acquired through EMI after 5 April 2012.
All the other entrepreneurs' relief rules, such as the requirement for the shares to have been owned for at least a year ending with the disposal date, remain in place. There are other requirements as well.
Most employees with EMI options end up holding too few shares in the company to enjoy the relief. This should no longer be the case. You may now wish to consider whether or not the relief will be available to you and whether it is advisable to wait to exercise your EMI option as a result.
There may be many factors in making this decision so do not hesitate to contact Nick Wallis or a member of the tax and business services team to discuss the implications of this decision for your particular circumstances.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.