2009 Pre-Budget Report: amendments to enterprise management incentives legislation

An update about proposed amendments to the legislation governing enterprise management incentives (EMI) options.

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The 2009 Pre-Budget Report confirmed that, as previously announced, provisions will be included in Finance Bill 2010 to amend the rules about which companies qualify to grant enterprise management incentives (EMI) options ...show full speedread

The 2009 Pre-Budget Report confirmed that, as previously announced, provisions will be included in Finance Bill 2010 to amend the rules about which companies qualify to grant enterprise management incentives (EMI) options. The amendments will extend the definition of a "qualifying company" to cover companies which have a UK permanent establishment (and meet the other EMI qualifying requirements). These changes are necessary to ensure that the EMI regime complies with EU state aid guidelines.

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Background

In August 2009, HM Treasury announced that the European Commission (www.practicallaw.com/1-107-6244) had granted state aid (www.practicallaw.com/9-385-1413) approval for enterprise management incentives (EMI) options (www.practicallaw.com/7-107-6533) (see Legal update, EMI options: relaxation of requirement for mainly UK activities; Commission confirms no state aid breach (www.practicallaw.com/8-422-3998)).

 

Amendment to definition of "qualifying company"

Currently, one of the statutory requirements for a company to qualify to grant EMI options is that the qualifying trade of the company (or its group) must be carried on wholly or mainly in the UK (see Practice note, EMI options: trading activities (www.practicallaw.com/2-380-1780)).

One of the conditions of the state aid approval for EMI options was the extension of the rules on which companies could qualify to grant EMI options to include all companies with a permanent establishment (www.practicallaw.com/6-107-6996) in the UK and which satisfied the other qualifying requirements.

As part of the 2009 Pre-Budget Report, HM Revenue & Customs have published draft legislation (together with a regulatory impact assessment) to amend the definition of a qualifying company, by:

  • Removing the requirement for a qualifying trade to be one which is carried out wholly or mainly in the UK.

  • Inserting a new requirement that the EMI company must have a permanent establishment in the UK.

 

Sources

Draft legislation: Enterprise Management Incentives and Impact Assessment of Changes to the Tax-based Venture Capital Schemes and Enterprise Management Incentives.

 
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