For businesses that implemented Enterprise Management Incentive (EMI) schemes several years ago, with share options which remain unexercised and who are approaching their 10-year deadline, this is a good time to undertake a review and potentially make use of the extension of the time limit to 15 years.
The changes in a number of the limits for EMI purposes, effective from 6 April 2026 has provided an opportunity to keep certain tax advantages in place for longer. Among the headline changes is an extension of the qualifying exercise period from 10 years to 15 years, with existing unexercised options able to benefit from the change retrospectively, provided there have been no disqualifying events and the company and participants remain eligible. This creates an important opportunity for businesses with an ageing EMI scheme to revisit their arrangements.
What has changed?
From 6 April 2026, the qualifying exercise period for EMI options has increased from 10 years to 15 years.
Importantly, the legislation also allows many existing EMI options that have not already been exercised, expired or lapsed to be amended so they can benefit from the extended timeframe. This means businesses may not necessarily need to replace existing awards or create entirely new arrangements simply because the original 10-year deadline is approaching.
For growing businesses and scale-ups, this additional flexibility better reflects the reality that value creation and employee retention strategies often extend beyond a decade.
What should businesses with an older EMI scheme consider?
The extension to the time limit provides a valuable opportunity to undertake a broader review.
Extending the time limit may be beneficial if there are currently no exit plans but there may be in future:
- This will prevent the need to cancel and re-grant the share options, which would be more costly to implement.
- Making use of the extension will also preserve the initial exercise price, as on a re-grant of options the value of the shares may have increased since the scheme was initially put in place. (Alternatively, if the options are cancelled and re-granted, the new share options may require a higher exercise price to avoid an income tax charge when they are awarded).
Review the option documentation
The first step is reviewing the original documentation and to consider whether the original incentive objectives still apply.
For some businesses, extending existing options may be the right outcome. For others, a broader refresh of the incentive strategy may make more sense.
Questions to consider include:
- Are the same employees still key to future growth?
- Is an exit still anticipated?
- Would a revised incentive structure better support future objectives?
Confirm continued EMI scheme eligibility
Although the options may have qualified when granted, companies should ensure there are no issues that could affect the intended tax treatment.
This involves reviewing:
- The original grant documentation
- Any previous amendments
- Option holder eligibility
- Potential disqualifying events that may have occurred since grant (i.e. relating to ownership and/or trading)
A review can help identify issues before changes are made and the supporting documentation will be useful to support a future due diligence process.
The extension provides flexibility, but it also acts as a useful trigger for a wider strategic discussion around ownership and rewards.
Employee engagement
Although the ability to retain favourable EMI tax treatment is a significant attraction, employees should understand what any changes mean in practice. Clear communication can help maintain engagement and ensure participants understand the long-term value of their awards and the rationale behind any amendments.
An opportunity to avoid unnecessary restructuring
Prior to the extension, businesses approaching the 10-year limit had two options, either cancel the options and re-grant (and potentially have to agree a higher exercise price to maintain the tax advantages) or allow the options to stay in place which then in turn become unapproved (non-tax advantageous) options. The extension to the time limit offers a potentially cheaper/simpler route where the original commercial intentions remain valid.
For companies with EMI options nearing expiry, the additional five years may provide valuable breathing space, allowing incentive arrangements to remain aligned with business objectives rather than being driven by an arbitrary deadline.
How Azets can help
If your business operates an EMI scheme and has options approaching the 10-year limit, now is a good time to review your arrangements.
Our share schemes specialists can help you assess whether existing options may benefit from the new 15-year exercise period, identify any technical considerations, review documentation, and ensure your incentive strategy remains aligned with your wider business objectives.
Whether you are considering extending existing awards, implementing a new scheme, or exploring alternative employee share schemes, we can help you understand the options available and the practical steps involved.