Implementing an EMI scheme seemed complex, but Pennyhills made the entire process seamless. Their expert guidance allowed us to create a highly effective way to reward and retain our top talent, aligning their future with ours. A truly invaluable service!
Case Study
EMI Scheme set up
Heads, Hearts & Tails Ltd
Industry: Creative Consultancy, Event Management
Location: East London
Est. 2012
Team Size: <10
Bespoke Enterprise Management Incentive (EMI) Scheme Implementation
The Challenge
Heads, Hearts and Tails Ltd, a dynamic and innovative branding and design agency, understood that their continued success hinged on attracting, motivating, and most importantly, retaining their key management personnel and top talent. In a competitive creative industry, traditional remuneration alone often isn’t enough to foster long-term loyalty and commitment, especially in high-growth businesses. They sought a strategic, tax-efficient mechanism to incentivise their core team, aligning their personal success directly with the growth and value of the company. Their challenge was to implement a sophisticated share option scheme that was both attractive to employees and compliant with HMRC regulations, ultimately rewarding loyalty and hard work.
Pennyhills’ Solution
Pennyhills partnered with Heads, Hearts and Tails Ltd to design and implement a bespoke Enterprise Management Incentive (EMI) scheme, tailored specifically to their business structure and talent retention goals. Our comprehensive solution involved the following critical steps:
Initial Feasibility Assessment
We first assessed Heads, Hearts and Tails’ eligibility for an EMI scheme, confirming they met the size and independence criteria set by HMRC for qualifying companies. This crucial first step ensures the scheme can even be considered.
Scheme Design and Strategy
We collaborated closely with the company’s leadership to design the optimal EMI scheme structure. This involved determining the number of options to be granted, the exercise price, the vesting schedule (conditions under which options can be exercised, e.g., time-based, performance-based), and addressing any specific objectives for key personnel.
Company Valuation
A critical component of an EMI scheme is agreeing on the company’s valuation with HMRC before options are granted. Pennyhills conducted the necessary valuation work and engaged with HMRC to obtain advanced assurance on the company’s market value, ensuring a pre-agreed base for future tax calculations.
Legal Documentation and HMRC Registration
We then prepared all the necessary legal documentation, including EMI option agreements for each employee, board minutes, and shareholder resolutions. Following this, we meticulously handled the registration of the EMI scheme with HMRC within the statutory 92-day deadline from the date of grant, a non-negotiable step for the scheme to be valid and for employees to benefit from its significant tax advantages.
Employee Communication and Support
We assisted Heads, Hearts and Tails in clearly communicating the benefits and mechanics of the EMI scheme to their key management personnel, ensuring they understood the value and potential tax efficiencies.
Ongoing Compliance and Reporting
Pennyhills advised on the ongoing annual reporting requirements to HMRC and ensured the scheme remained compliant with all regulatory changes, providing peace of mind for the company.
Key Results & Impact
By leveraging Pennyhills’ expertise in tax planning and share incentive schemes, Heads, Hearts and Tails Ltd successfully implemented a highly attractive and compliant EMI scheme. This strategic initiative provided a powerful tool for retaining and rewarding their key management personnel, fostering increased loyalty, motivation, and a direct stake in the company’s long-term success. The scheme not only incentivised hard work through future equity but also offered significant tax advantages to employees upon exercise and sale of shares, making it a win-win for both the company and its valuable team members.
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