Furloughing employees and EMI options (April 9th 2020)

Furloughing employees and EMI options

Many businesses are making use of government’s Coronavirus job retention scheme.

If you furlough employees under the scheme, they are prohibited from working while they are furloughed.
This may pose a risk if the employee concerned holds an EMI option.
One of the conditions of the EMI is that there is a full-time working requirement.
If an option holder is furloughed, this condition is technically failed.
This will mean that the option will lose all of the beneficial tax treatment associated with EMI.

We hope that HMRC will publish a concession on this very point.

However, until such a concession is announced, it would be a good idea to hold back, if you can, on furloughing EMI share option holders.

You may wish to consider allowing the option holder to exercise the share options before furloughing, hence avoiding the problem altogether.