The Enterprise Management Incentive: Using Share Options for International Staff

The Enterprise Management Incentive (EMI) scheme is widely regarded as the most tax-efficient way to incentivise key employees in qualifying UK companies. It allows selected employees to receive options over shares with virtually no tax on grant or vesting, and with gains taxed at capital gains tax rates on disposal (rather than income tax rates on exercise), with the potential for a further reduction through Business Asset Disposal Relief. But when a company has employees based internationally — whether expats working abroad for the company, or foreign nationals joining the UK operation — the EMI rules create specific challenges that require careful management.

This guide focuses on the practical issues of using EMI for companies with an international workforce, distinct from the general guide on share option planning for mobile executives.

EMI: The Core Rules

EMI allows a qualifying company to grant options over shares to qualifying employees. The headline tax treatment is:

• No income tax at grant
• No income tax at vesting
• No income tax at exercise (where options are granted at or above market value)
• Capital gains tax on sale of shares acquired through EMI exercise (at rates of 18%/24% as of 2026/27)
• Business Asset Disposal Relief potential: where the employee has held the option for at least two years from the date of grant and holds a qualifying stake, BADR may apply, reducing the CGT rate to 18% for 2026/27 (the BADR rate rose from 10% to 14% on 6 April 2025 and to 18% on 6 April 2026), subject to the £1 million lifetime limit

The maximum value of EMI options per employee is £250,000 at the date of grant. The company must not have more than £6 million of outstanding EMI options at any time (raised from £3 million on 6 April 2026).

The Company Qualifying Conditions

For EMI to be available, the company must:

• Be an independent trading company (or holding company of a trading group) with gross assets not exceeding £120 million and fewer than 500 full-time equivalent employees (both limits raised on 6 April 2026 — previously £30 million and 250 employees)
• Not be a subsidiary or controlled by another company
• Carry on a "qualifying trade" — excluding certain excluded activities (dealing in land, financial instruments, leasing, legal and accountancy services under certain circumstances, property development, farming, etc.)
• Have a "permanent UK establishment" (as of post-Brexit rules, the company must have at least one UK permanent establishment, and the EMI option must relate to shares in that company)

The Employee Qualifying Conditions for International Staff

This is where international complexity begins. The employee qualifying conditions for EMI require that the employee:

• Works at least 25 hours per week for the company (or at least 75% of their total working time if less than 25 hours in total)
• Is not a "material interest" holder (broadly, does not own more than 30% of the company's ordinary share capital)

The working time requirement in an international context: For an employee based overseas, the question is whether their working time for the UK company meets the 25-hour minimum. If the employee works full-time (say, 40 hours per week) entirely for the UK company but is physically located in Singapore, the working time condition is met. If the employee splits time between the UK company and a local subsidiary or employer, the working time calculation must reflect only hours worked for the qualifying company.

Post-grant changes in qualifying conditions: If an employee ceases to meet the qualifying conditions after grant — for example, they take a sabbatical, their role changes, or they move to work primarily for an overseas entity — the options lose their EMI status from the date the condition ceases to be met. Gains accruing after disqualification may be taxed under the unapproved options rules (income tax at exercise) rather than EMI rules (CGT at sale).

Notifying HMRC of the Grant

EMI grants must be notified to HMRC within 92 days of grant. This is a strict deadline; failure to notify within 92 days results in the options losing their EMI status entirely. The notification is made online via HMRC's Employment Related Securities service.

The notification must include the employee's details, the terms of the option agreement, the agreed market value (HMRC should ideally have granted a pre-grant valuation approval), and confirmation that both the company and employee qualifying conditions are met.

Market Valuation and HMRC Approval

EMI options must be granted at or above market value to achieve the full tax-free treatment at exercise. Granting at a discount is permitted but the discount is subject to income tax (and NIC) at exercise. For private companies, market value is not self-evident and must be agreed with HMRC Shares and Assets Valuation (SAV) in advance.

HMRC's SAV team generally turnaround valuations within four to six weeks, though complex group structures or businesses in sectors with limited comparable data may take longer. Securing a pre-grant valuation approval protects both the company and employees from a later HMRC challenge to the exercise price.

Tax Treatment for Non-UK-Resident Employees

For employees who are non-UK-resident at the time of exercise or disposal, the tax treatment of EMI options depends on a combination of factors:

At exercise (where income tax might apply): If the option was granted at a discount (below market value), the discount element is treated as employment income. For non-UK-resident employees, UK income tax applies to the UK-workday element of this amount. The apportionment is based on the proportion of the vesting period during which UK duties were performed.

On disposal of shares: Gains on the sale of shares acquired through EMI exercise are CGT. For non-UK-resident individuals, CGT does not generally apply to non-UK-situs assets. Shares in a UK company are UK-situs; however, even UK shares held by non-residents are only within the scope of NRCGT where the company is a close company with substantial UK property (broadly: property-rich close companies). EMI shares in a trading company are not typically property-rich and non-residents may therefore dispose of them free of UK CGT, subject to the temporary non-residence rules.

Business Asset Disposal Relief for non-residents: BADR requires the employee to have held the EMI option for at least two years from the date of grant and, at the time of disposal, to be an employee or officer of the company. Non-residents who are no longer employed may not meet the BADR conditions.

NIC Implications for International Staff

Employee NIC Class 1 applies to employment income. Where an EMI option is granted at a discount, the discount element at exercise constitutes earnings and is subject to NIC (both employee and employer Class 1, unless an employer NIC election has been entered into). For employees within the scope of UK NIC, this creates a NIC cost at exercise.

For employees who are not within the scope of UK NIC — because they are based overseas with a valid detached worker certificate, or because they are genuinely employed by an overseas entity — the NIC exposure at exercise does not arise, which can significantly reduce the cost of the option.

Design Considerations for International EMI Schemes

Companies designing EMI plans for international workforces should consider:

1. Eligibility mapping: Document which employees meet the qualifying conditions and re-certify annually (particularly where working time splits between the UK entity and local entities are involved).

2. Good leaver and bad leaver provisions: International mobility often leads to employee departure. Good leaver provisions should allow departing employees a reasonable window to exercise vested options; bad leaver provisions should clearly define what constitutes a bad leaver event (including breach of employment terms or competitive activity).

3. Exercise windows and blackout periods: Where the company has a listed parent or is heading towards an IPO or trade sale, exercise windows must be designed to comply with insider trading rules across jurisdictions.

4. Tax equalisation: Internationally mobile employees may face differing tax outcomes depending on their residence at the time of exercise. A company tax equalisation policy helps ensure equity in the incentive programme.

5. Phantom options for excluded jurisdictions: Where employees are based in countries where EMI cannot be replicated due to legal restrictions (for example, US employees require a separate ISO/NSO plan), phantom share schemes or cash-settled phantom options may be used alongside EMI for UK-based employees.

How Global Investments Can Help

Global Investments advises early-stage and established companies on designing and implementing EMI plans for internationally distributed workforces. We help identify qualifying employees, navigate working-time conditions, coordinate HMRC notifications and valuations, and model the tax outcomes for employees across different jurisdictions. We work alongside specialist employment tax and equity compensation advisers to ensure plans are compliant and commercially effective. This guide reflects the position as of 2026; EMI legislation and HMRC practice change and personalised advice is essential before establishing or amending an EMI plan.