Under the EMI, employees are granted options over shares. The options are exercisable in the future, but the exercise price is usually set at the share price on the date the option is granted. If the company has grown and increased in value by the time the options are exercised, the employee acquires shares at a discounted price. Ordinarily, acquiring shares at a price that is less than their market value would lead to a tax (and possibly NI) charge on the difference. However, provided the options are successfully granted and exercised within the EMI rules, no income tax charge arises.The employee then holds shares and can potentially receive performance-related dividends as a form of remuneration. If the shares are later sold, the employee will be subject to capital gains tax on any growth in excess of the acquisition price. The EMI is very popular with young companies that have excellent growth prospects.

The government has now issued a call for evidence to help establish the future of the scheme. It is looking to determine whether it's working as it should, whether it should be expanded, and whether there are better alternatives. The closing date for responses is 26 May 2021. Responses to the queries raised should be sent to emiconsultation@hmtreasury.gov.uk.