ACCA Advanced Taxation (ATX) Practice Exam

What is the maximum value of shares per employee under the EMI scheme?

1. £500,000

2. £100,000

3. £250,000

4. £400,000

The correct answer is: £250,000

Under the Enterprise Management Incentive (EMI) scheme, the maximum value of shares that can be granted to an employee is capped at £250,000. This limit applies to the market value of the shares at the time of the grant and is designed to ensure that the tax advantages of the EMI scheme are focused on smaller businesses and incentivize employees without excessively diluting their ownership stakes. The EMI scheme is particularly beneficial for companies that wish to attract and retain talent by offering stock options that can lead to significant financial rewards upon successful company performance. The £250,000 threshold aligns with the intent of the EMI scheme to be accessible for smaller enterprises while providing a substantial incentive to employees. Other values such as £100,000, £400,000, and £500,000 are not aligned with the parameters set by the EMI scheme, where the latter two amounts would exceed the allowable limit for share grants under this specific incentive program. This structured cap ensures equity compensation remains manageable for businesses while promoting a culture of ownership and accountability among employees.