In a tabled amendment to the Finance Bill 2020, the government has introduced a time limited exception for EMI optionholders who are unable to meet the 'committed time' requirement as a result of COVID-19. This will be welcome news to companies operating EMI schemes.
The committed time requirement means that an employee must work at least 25 hours a week or, if less, 75% of the time they do work, for the company. The requirement must be satisfied by an employee both at the time of grant of an EMI option and throughout the period the EMI option is held.
The concern around COVID-19 was that a furloughed employee who does not undertake any work fails to satisfy this condition. For employees holding EMI options, this would result in a disqualifying event, forcing them to exercise their options within 90 days in order to retain beneficial tax treatment.
The amendment provides that any time an employee would have been required to work but for 'not being required to work for reasons connected with coronavirus disease' will form part of their committed time. It is intended to apply not only to employees placed on furlough, but also to those who have had to take unpaid leave or work reduced hours as a result of COVID-19. It will apply to both the grant of EMI options and to the consideration of a disqualifying event.
The amendment is backdated to 19 March 2020 and will cease to apply on 5 April 2021, although provision is made for the exception to be extended for a further 12 months.
For guidance on the impact of COVID-19 on other tax advantaged employee share schemes, refer to my earlier blog.