Earlier this year, we highlighted changes to the way EMI options work, making it easier for option-holders to qualify for Entrepreneurs’ Relief and hence to benefit from the 10% capital gains tax (rate rather than the normal 28% rate).
These changes meant that EMI options exercised after 5th April 2013 would qualify for entrepreneurs’ relief on exit, even if the option/shareholder did not hold 5% of the shares in the company (normally a condition for entrepreneurs’ relief to apply).
Getting better all the time
The Finance Act 2013 has now confirmed that, under transitional rules, options exercised in the tax year 2012/13 – that is, from 6th April 2012 to 5th April 2013 – will also qualify.
It’s unusual for HMRC to back-date a benefit like this. It means that shares which were acquired through the exercise of EMI options last tax year will also qualify for entrepreneurs’ relief, even if the option/shareholder does not own 5% of the share capital.
So if you or your team exercised options and were kicking yourselves for missing out on the entrepreneurs’ relief benefit, you now have a second chance.
What you need to do
In order to benefit, you will need to claim an election in your 2012/13 tax return by 31st Jan 2014. If you exercised any EMI options last year, making this election now could save you a lot of tax at exit.