What are the key timing rules for an EMI share option scheme?

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The Enterprise Management Incentive (EMI) scheme is the most popular tax-advantaged share option scheme for small and growing UK companies, letting employees acquire shares later at little or no Capital Gains Tax cost compared with Income Tax, but its generous tax treatment depends on strict timing rules that companies must follow precisely. **The 92-day notification deadline** After granting EMI options to an employee, the company must notify HMRC online within 92 days of the date of grant. This is one of the strictest and most unforgiving deadlines in UK tax law -- there is no general discretion for HMRC to accept a late notification (barring extremely narrow exceptional circumstances), meaning a grant notified on day 93 loses its EMI tax-advantaged status entirely and is instead treated as an unapproved option, with Income Tax and National Insurance due on exercise instead of the more favourable EMI/CGT treatment. **Company and employee qualifying conditions must hold throughout** Beyond the initial grant, both the company (gross assets under £30 million, fewer than 250 full-time equivalent employees, carrying out a qualifying trade) and the employee (working at least 25 hours a week, or if less, at least 75% of their working time, for the company) must continue to meet EMI qualifying conditions throughout the period between grant and exercise -- if the company grows beyond the limits, changes its trade to a non-qualifying activity, or the employee's hours drop below the threshold, this can trigger a "disqualifying event". **The 90-day window after a disqualifying event** If a disqualifying event occurs (such as the company being bought by a larger, ineligible parent, or the employee reducing their hours), the employee generally has 90 days from that event to exercise their options while still retaining EMI tax treatment on the value accrued up to that point -- exercising after the 90-day window means the growth in value after the disqualifying event is taxed as income rather than under EMI/CGT rules. **Maximum 10-year option life** EMI options must normally be exercised within 10 years of the grant date to retain their tax-advantaged status; options exercised after this point lose EMI treatment. **Individual and company limits** An employee cannot hold unexercised EMI options worth more than £250,000 (based on market value at grant) at any one time across all their EMI options with the company, and the total value of unexercised EMI options across all employees of the company cannot exceed £3 million. **Why timing errors are so costly** Because EMI's attraction is largely about deferring tax until sale and paying Capital Gains Tax (often at Business Asset Disposal Relief's 18% rate for qualifying disposals) rather than Income Tax and National Insurance on exercise, missing any of these deadlines can turn what was intended as a highly tax-efficient reward into a much more expensive Income Tax and NI charge for the employee. **Practical tip** Growing companies using EMI should build a compliance calendar tracking each grant's 92-day notification deadline, monitor company size/employee eligibility on an ongoing basis for potential disqualifying events, and take specialist advice immediately if a corporate transaction (funding round, acquisition, or restructuring) is being considered, since these often trigger disqualifying events without anyone realising in time.

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