HMRC’s latest Employment-Related Securities Bulletins focus on the impact of COVID-19 on employee share and incentive schemes. Here is our enhanced version.

Enterprise Management Incentive (EMI): Working time

  • Owing to the Coronavirus pandemic some Enterprise Management Incentive (EMI) scheme participants have been unable to meet the working time of at least:
    • 25 hours per week or, if less, at least 75% of their working time.
  • From 19 March 2020 HMRC accept that:
    • If an employee would otherwise have met the scheme requirements but did not do so for reasons connected to the Coronavirus pandemic, the time which they would have spent on the business of the company will count towards their working time.
  • HMRC will also disregard the reduction in working time as a disqualifying event if it is for reasons connected to the Coronavirus pandemic.
  • HMRC will accept the following as reasons for which an employee may have been unable to meet the working time requirements:
    • Furlough.
    • Working reduced hours.
    • Unpaid leave.
  • In all cases, the reason must be attributable to the Coronavirus pandemic and the period must have begun on or after 19 March 2020.
  • Employers and employees must keep evidence to show that there is a link to the Coronavirus pandemic.
  • Finance Act 2020 modified existing legislation to enact these changes.
  • HMRC has exercised managerial discretion available to ensure this protection until the EMI working time declaration clause receives royal assent next year.
  • The modifications take effect from 19 March 2020 and are due to end in April 2021, but HM Treasury can extend the exception for a further 12 months if the pandemic has not ended by April 2021.
  • HMRC give four examples in the bulletin:
    1. Mr A was granted EMI options in March 2015 and has worked 40 hours a week for his employer throughout the life of the options. On 25 March 2020, Mr A was furloughed by his employer under the Coronavirus Job Retention Scheme (CJRS) and remains in furlough. HMRC will accept that this is related to the Coronavirus pandemic and EMI options remain qualifying.
    2. Ms B was granted EMI options in January 2020 and worked 30 hours a week for that Company Z. She also worked 10 hours a week for Company Y. On 11 May 2020, her hours at Company Z were reduced to 20 hours per week. If the reduction in hours is due to the Coronavirus pandemic then HMRC will accept that EMI options remain qualifying.
    3. Ms C was granted EMI options in September 2018 whilst working 37 hours a week for her employer. On 1 April 2020, Ms C took unpaid leave. HMRC may accept that this is related to the Coronavirus pandemic. Employers and employees must document the circumstances and show there was a requirement to take unpaid leave because of the Coronavirus pandemic. If this is the case the EMI options will remain qualifying.
    4. Mr D was placed on furlough by Company X on 1 April 2020 for reasons connected to the Coronavirus pandemic. Prior to this date, he was employed full time. Company X wish to grant him EMI options on 1 June 2020 while he remains on furlough. Mr D can be granted qualifying EMI options provided that all the other requirements of Schedule 5 ITEPA are met at the time of grant.

Enterprise Management Incentive (EMI): Full-Time Equivalent employees

  • EMI options can only be granted by companies who have fewer than 250 Full-Time Equivalent (FTE) employees.
  • Employees on furlough, working reduced hours or on unpaid leave for reasons related to the Coronavirus pandemic must be counted for FTE purposes as if they were working the hours they would otherwise have been required to work if it were not for the Coronavirus pandemic.
  • For example:
    • A full-time employee on furlough must still be counted as a full-time employee.
    • A full-time employee working reduced hours must still be counted as a full-time employee.
    • A part-time employee who was previously 0.75 FTE but who is now working reduced hours equivalent to 0.5 FTE must still be counted as 0.75 FTE.
  • This does not affect the exceptions already contained in paragraph 12A(4)(b) Schedule 5 ITEPA 2003.

Enterprise Management Incentive (EMI): State aid

  • The EMI scheme will continue to be available for use following the end of the transition period.
  • These schemes were approved by the Commission as required under state aid rules but will continue to be available under UK law.

Save As You Earn (SAYE): Contact details

  • HMRC must notify approved SAYE providers when a SAYE prospectus is withdrawn and a new one is issued.
  • HMRC have identified that certain providers have not kept their contact details updated.
  • Employers should make sure that HMRC holds their correct contact details so that they can tell savings providers of future withdrawals of the SAYE prospectus and the issue of a new prospectus.

See ISA guide

Save As You Earn (SAYE): Extended payment holiday

HMRC have included four examples to clarify how the 12-month extended payment holiday for SAYE referred to in the June 2020 Bulletin will apply:

  1. If a SAYE participant had already postponed contributions by up to 12 months pre-COVID and did not resume their payments on the 13th occasion, their SAYE contracts will be cancelled. The extended payment holiday terms will therefore not apply to those participants.
  2. If a SAYE participant postponed contributions up to the maximum 12 months but resumed payments on the 13th occasion and then after Coronavirus became furloughed or on unpaid leave and needed to postpone contributions again to their SAYE plan then they will benefit from the extended pause.
  3. If a participant had postponed payments by up to 11 months in February 2020 and became furloughed in March 2020 and as a result then missed contributions in April and May a total of 13 months payments will have been missed. If the missed payments were the result of Coronavirus then the extended payment holiday terms will apply in these circumstances.
  4. Participants who were due to resume payments on the 13th occasion in March 2020 but who were then furloughed or took unpaid leave due to Coronavirus and who were then unable to afford to resume payments, the extended payment holiday will apply to them.
  • The Job Support Scheme (JSS) is due to replace the CJRS.
    • HMRC have confirmed that employees working less than their usual hours and who will be eligible for the scheme will be treated as being part furloughed for the purpose of SAYE.
  • For now, the extended payment holiday will continue to apply to these participants who miss contributions whilst receiving payments under the JSS.

Deadlines for registration of new schemes, filing of returns and notifying new EMI options

  • During the Coronavirus pandemic, employers should try to meet their obligations such as registering new schemes, filing returns and notifying new EMI options as soon as practicable.
  • HMRC will consider delays owing to the Coronavirus pandemic as a reasonable excuse for missing some tax obligations.
  • Employers should explain how they were affected by the Coronavirus pandemic when making appeals.

See Shares, securities & options: Tax compliance and Employment-Related Securities: Reporting issues

External links 

HMRC ERS Bulletin July 2020

HMRC ERS Bulletin October 2020