EMI options: HMRC’s new guidance on discretion

EMI options are one of the most tax-efficient share schemes in Europe providing the beneficial tax treatment of owning shares and the ‘one-way bet’ of an option. Recently HMRC’s view on the operation of discretions in the rules of such schemes (for example to allow leavers to exercise options or to accelerate vesting on an exit) has not been entirely clear. HMRC’s new guidance makes it clear that while the existence of an unlimited discretion in the rules of the scheme will not prevent the options qualifying as EMI options the exercise of options pursuant to the operation of that unlimited discretion will be treated as the surrender and regrant of the option and therefore the exercise of the option will be treated as non-tax advantaged. In general HMRC appears far more concerned about discretions which bring forward the time an option can be exercised than...