Once the Bill becomes law, shares acquired through the exercise of EMI options should qualify for entrepreneurs' relief (a flat 10% capital gains tax rate on lifetime gains up to £10m), without those shares having to be held for at least twelve months prior to disposal (which is one of the conditions for claiming ER in the absence of acquiring them via an EMI option). Instead the twelve month qualifying period will relate to the holding of the EMI option, rather than the holding of the shares.
It means "exit only" EMI options (as many of them are currently structured) should qualify for ER, with the result that there will no longer be any need to plan ahead and exercise those options early to take advantage of ER on a sale of the business.
Some of you may recall that this was the position under the old taper relief rules, where the period holding the EMI option counted towards the individual's taper relief period.
This is really welcome, if unexpected news (although many share plan professionals including me have been advocating this change for some time).
In addition, the legislation is proposing extending the time period from 40 days to 90 days in which an EMI option can be exercised free of income tax and NICs following a disqualifying event.
For more information on these changes, and how they may impact your circumstances and any tax planning opportunities, please do contact me.