Small firms can continue to take advantage of Enterprise Management Incentives (EMI) until 2018, after the Treasury gained state approval from the European Commission.
The tax break is designed to help fast-growing, small companies recruit and retain highly skilled staff by providing a tax break on the share options SMEs offer to employees.
The Treasury said the EMIs ‘play a crucial role in enabling small firms to recruit and retain the highly skilled workers they need to thrive’.
Eligibility criteria for the tax break is also set to widen allowing UK-based firms more scope for overseas activity. The scheme is currently only open to firms with activities ‘wholly or mainly’ in the UK.
EMIs allow small and medium-sized businesses to offer staff share options up to £120,000. While usual tax rules require income tax and national insurance to be paid on any gains in share value, the EMI allows an exemption of tax liability for both company and employee.
The government estimates another 9,000 companies will now be able to offer share options to staff under the EMI.
Economic secretary to the Treasury, Ian Pearson, said:
“This is excellent news for small and medium-sized companies, particularly at a time when their success will be crucial to economic recovery.
“Long-term State Aid approval of EMI provides certainty over the future of the scheme, whilst the relaxation of eligibility requirements will help SMEs with substantial international activities to recruit highly-skilled UK-based staff.”
© Crimson Business Ltd. 2009