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EMI exercise price and valuation

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What would hmrc do in this scenario:

A new start-up company we will call TheCompany, Grant's emi share options to employee(me) with an exercise price of 10p.

EMI agreement gets signed by employee on the 1st of January before the deadline or they lose their shares.

TheCompany submits their first val231 to hmrc on 1st of February with AMV of 50p and UMV of 60p and is subsequently approved by hmrc.

TheCompany then submits the employees emi agreement to hmrc for the first time with exercise price of 10p.

Thank you in advance.

Edited to add: val231 was approved by hmrc.

Replies (10)

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Replying to David Ex:
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By Bert1
03rd Dec 2021 21:42

David Ex wrote:

https://www.gov.uk/tax-employee-share-schemes/enterprise-management-ince...

I have been all over that page. Dont take this the wrong way but if I could understand what I was looking for on that page and what it was saying I wouldn't be here asking for help trying to figure out what would happen in my scenario.

Regards,

Bert

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Replying to Bert1:
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By David Ex
03rd Dec 2021 22:10

Bert1 wrote:

David Ex wrote:

https://www.gov.uk/tax-employee-share-schemes/enterprise-management-ince...

I have been all over that page. Dont take this the wrong way but if I could understand what I was looking for on that page and what it was saying I wouldn't be here asking for help trying to figure out what would happen in my scenario.

Regards,

Bert

Right. In that case, you need paid for advice.

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By D V Fields
03rd Dec 2021 22:56

HMRC will probably expect the company or the employee to pay any taxes or benefit in kind that may fall due as a result. What are you expecting them to do?
Dave

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Replying to D V Fields:
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By Bert1
03rd Dec 2021 23:11

Thanks D V. I guess I thought hmrc would reject the employee emi agreement as it was signed before a valuation being approved by hmrc and that the exercise price was lower than the valuation given. Have I wrongly assumed the exercise price would need to match the valuation.

Sorry if I have misunderstood the purpose of this forum. I dont want cause any trouble.

Regards,

Bert

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Replying to Bert1:
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By Tax Dragon
03rd Dec 2021 23:25

Don't worry, Sift (the site owners) don't understand the purpose of this forum either.

There's no requirement for your exercise price to match AMV or UMV. HMRC won't do anything. Not really sure what you mean. Your employer needs to file whatever returns your employer needs to file. On exercise, if you exercise, you'll be taxed on the difference between the values.

Your employer really ought to be able to answer all your questions about the scheme, or know an accountant (that helped them implement the scheme) who can.

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Replying to Tax Dragon:
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By Bert1
03rd Dec 2021 23:50

Thanks tax dragon. I suspected shenanigans so dont want to speak to them.

It's been made clearer now that options can be granted before a valuation.

Thank you everyone.

Regards,

Bert

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Replying to Bert1:
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By Hugo Fair
04th Dec 2021 10:58

I guess your reluctance to speak to them may depend on the nature of the suspected shenanigans.
But forewarned .. and all that. It's usually better to know about any problem before it happens rather than adopting the ostrich strategy!

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By AndyC555
04th Dec 2021 14:35

Exercise price can be anything you like. Higher than an agreed HMRC valuation, lower or the same. It's the tax outcomes that differ.

If the exercise price is below the agreed HMRC valuation, the difference is an income tax matter and not CGT.

Thanks (1)
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By Bert1
04th Dec 2021 15:53

Thanks guys I now understand it and was able to do further research with what had been said. Much appreciated.

Regards,

Bert

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