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EMI Options and Working Time during Coronavirus Lockdown

In the midst of the coronavirus lock-down, many companies will likely look to make adjustments to its staff hours in order to weather the economic ramifications of the pandemic. Employers who have deployed EMI options and employees who have been awarded grants of EMI options should be careful to continue to comply with the working time requirements in order to ensure continued EMI tax treatment of such options.

See our previous blog on EMI options to learn more about them generally and how they work here: EMI Options – The Fundamentals

Working Time

To be eligible to be granted an EMI option, an employee must work for the employer company (or a company in its group) for at least 25 hours per week, or if less, 75% of their working time. This is a strict requirement of the EMI rules in tax legislation and is not a condition that can be relaxed by the company granting EMI options.

In the below examples, assume all other conditions for meeting EMI requirements are met by the company and employee.

Example 1

Employee#1 works as an employee of a company (that is eligible for EMI) for 17 hours a week. Employee#1 does not meet the 25 hours requirement. Employee#1 also works as a consultant for 4 hours per week. He does no other paid work. His total working time amounts to 21 hours a week. As 80% of his working time is for the EMI company, he meets the 75% requirement and will qualify the grant of an EMI option.

Example 2

Employee#2 works as an employee of the same company but for 18 hours a week so she does not meet the 25 hours requirement. She also works as a self-employed engineer for 12 hours per week. She does no other paid work. Her total working time amounts to 30 hours a week. Only 60% of her working time is for the EMI company, so she will not qualify for the grant of an EMI option.

The issue in the current situation is where an employee takes reduced hours and the employer company either lifts any restrictions on working elsewhere or else despite them (or for lack of them) the employee takes up a secondary employment. This might be as an emergency staff member at a supermarket for example, as follows:

Example 3

Employee#3 works as employee for the same company as above. He works 30 hours a week and so meets the 25 hours requirement. Employee#3 is then asked to reduce his hours to 20 hours per week and he agrees. He no longer meets the 25 hours requirement but will meet the 75% of working time requirement provided he takes up no other employment.

Employee#3 wants to help in tackling the consequences of the lockdown and needs to supplement his reduced income. Employee#3 takes up a job at the local supermarket delivering food to vulnerable groups of people. He works 7 hours a week for the supermarket. His total working time is now 27 hours per week which means his time working for the company is only 74%. He no longer meets the working time requirements for EMI.

Example 4

Employee#4 works for the same company and works 35 hours per week. The company puts Employee#4 on furlough because of the impact of coronavirus on the business of the company. Emplyee#4 takes up no other remunerated activity (whether employed or self-employed).

If, however, Employee#4 takes up secondary employment, he will jeopardise his working time and likely breach the terms of furlough cover provided by the government. (for more on the employment aspects of furlough, see our employment team information (Furlough Leave and the Job Retention Scheme)

In calculating the total working time, any time on sick leave, annual leave, maternity, paternity or parental leave needs to be taken into account.

Next Steps

Companies should highlight to employees that additional employment may impact on their EMI options. It might be that companies have restrictive covenants in employment contracts so that secondary employment is prohibited. Any relaxation of such provision may mean that employees rebalance the proportion of working time spent at the EMI company and losing their EMI eligibility.

A loss of EMI eligibility will mean the employee loses their EMI tax reliefs and the company will also lose the ability to make a corporation tax deduction equal to the growth in value of any shares acquired via an EMI option at exit (a benefit of EMI often overlooked!)

Enquiries have been made with HMRC to seek clarification on whether there will be any relaxation or special provision put in place for working time requirements during the pandemic lockdown. For now, 25 hours or 75% of time is a strict requirement.

Further Information

Watch this space for more information. Get in touch with the MBM Commercial Options Team at to find out more.

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