The high cost of accepting payment: an EMI pitfall

If an employee (including a director) is to enjoy the considerable tax benefits afforded to certain share options under the Enterprise Management Incentive scheme, he or she must be and remain at all relevant times an “eligible employee”.

One of the conditions required to secure and maintain that status relates to “commitment of working time”.  Specifically, the amount of time which the employee is required to spend on the business of the company granting the option (or a company within the same group) must be on average at least 25 hours per week (subject to adjustment for holidays, sick leave, pregnancy and the like).  Alternatively, if that threshold is not reached it is sufficient if the business of the company consumes at least 75% of the employee’s total “working time”.

It is with regard to this second leg that a pitfall arises for the unwary.  “Working time” means (broadly) time spent on remunerative work – more specifically, work the earnings from which are “general earnings” for tax purposes.  In a rare accord of tax law with common sense, this means that if there are no earnings (direct or indirect) of any kind from a particular office or employment, the work is not “remunerative work” and the hours devoted to it are not taken into account for the 75% test.  Thus, for example, if Miss Jones devotes an average of 5 hours a week to her (paid) role as non-executive director of a company and the same amount of time to her work as unpaid director of a charitable company, she is capable of being an “eligible employee” of the first company.

Consider what happens, though, if she accepts from the charity a reimbursement of the costs which she incurs in travelling from home to board meetings.  Such reimbursement counts as “general earnings”, converting the directorship with the charity into “remunerative work”, reducing the percentage of working time with the first company to 50% and disqualifying  her as an “eligible employee”.

Tax law does not always accord with common sense.

For more on EMI, please get in touch with your usual BKL contact or use our enquiry form.



Sam Inkersole

In 2022, Sam won the Taxation’s Rising Star award at the Taxation Awards in and was named in the Accountancy Age 35 Under 35.

Jon Wedge

While Jon’s client work focuses on the financial services sector, he also oversees the firm’s assurance service, as well as supporting the trainees following in his footsteps.


Elana joined us in 2017 as an ACA trainee, after graduating from Durham University where she had studied languages. She is now a manager in our assurance team.


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