Tech startups are made by their ability to hire, train, ramp and retain key staff – firestarters, problem-solvers, thrill-seekers, call them what you will. A major component in the hiring and retaining of staff is stock options, and in the UK, that is usually an EMI scheme.
I was saddened to read this recently – https://www.gov.uk/government/publications/employment-related-securities-bulletin/employment-related-securities-bulletin-no-27-april-2018 – a long-winded article that basically says that the EU’s approval for EMI schemes being lawful has lapsed and no new approval has been granted, so HMRC can no longer approve EMI schemes.
I am not commenting if this is monumental incompetence by the UK government, or a Brexit tactic from the EU, but I am expressing my frustration that this was allowed to lapse with nothing to replace it.
Yes, I can see the point that the awarding of EMI stock options may be a form of compensation – and I have felt this first hand during an acquisition where given the change of ownership and the accelerated vesting that went with the acquisition our stock options were taxed as income not as capital gains – I paid 54% tax on these option – including Employer’s NI, and I am still waiting for my Christmas card from the treasury.
However, for a vanilla scheme for a greenfield startup the lack of continuity from HMRC is extremely alarming.