Implications for share schemes


  1. Enterprise management incentives (EMI) schemes
  2. Save as you earn (SAYE) schemes
  3. Share incentive plans (SIPs)
  4. Company share option plans (CSOPs)

For further details on this topic in general, see the Why use a share scheme? guidance note and the rest of that topic.

Enterprise management incentives (EMI) schemes

There is an EMI commitment of working time requirement that must be satisfied by any employee in order to qualify to be granted an EMI share option. If employees are furloughed, there is therefore a potential risk of disqualification from the scheme.
ITEPA 2003, Sch 5, para 26

Finance Act 2020, s 107 addresses this issue. It has effect for the period 19 March 2020 to 5 April 2021 inclusive, and ensures that a disqualifying event does not occur purely as a result of an individual being furloughed, taking leave, or working reduced hours because of the coronavirus (COVID-19) pandemic. Draft legislation for Finance Bill 2021 takes this further by also allowing EMI options to be granted during that time period where those circumstances apply.

Where there are redundancies as a result of the economic impacts of coronavirus, redundancy will be a disqualifying event for EMI purposes. EMI tax relief will be lost if the option is exercised more than 90 days after a disqualifying event.
ITEPA 2003, Sch 5, paras 25–26

For further details on the usual scheme requirements, see the Qualifying conditions for EMI schemes ― employees guidance note.

Save as you earn (SAYE) schemes

A part of the eligibility criteria for SAYE schemes is that all full-time directors must be allowed to participate. It is possible that a full-time director put on furlough may cease to be eligible under the SAYE scheme.

It is not clear how HMRC will interpret this rule during the coronavirus outbreak. For more on this, see the SAYE schemes – an overview guidance note.

Share incentive plans (SIPs)

With SIPs, employees may change the amount they contribute to their partnership shares, or withdraw from their partnership share agreement entirely.

For furloughed employees, the SIP limits may have to be revisited. Limits for partnership shares are the lowest of £1,800 or 10% of salary. Employees’ salaries will be impacted by the furloughed period as the Government does not support businesses with 100% of salary costs, and this may affect the ability to contribute as expected to the scheme.

It is not clear if HMRC will interpret these rules during the coronavirus outbreak. For general information on this scheme, see the Share incentive plans ― an overview guidance note.

Company share option plans (CSOPs)

For CSOPs, the rules require that an individual is either a qualifying employee or a full-time director. It is therefore possible that a director put on furlough may cease to be eligible, as they can no longer be considered to be ‘full-time’. See the Qualifying conditions for company share option plans ― employees guidance note.

HMRC accepts that where employees and full-time directors, now furloughed because of coronavirus, have been granted options before coronavirus, those options will remain qualifying on the basis they were full time directors and qualifying employees at the time of grant. For general information on this scheme, see the Why use a company share option plan (CSOP)? guidance note.