ACCA Advanced Taxation (ATX) Practice Exam

Which of these is a condition for Enterprise Management Incentives (EMI)?

1. Maximum value of £50,000 per employee

2. Must include all employees

3. Gross assets must be less than or equal to £30 million

4. Must require a minimum ownership of 10%

The correct answer is: Gross assets must be less than or equal to £30 million

The correct choice regarding Enterprise Management Incentives (EMI) is that gross assets must be less than or equal to £30 million. This condition is crucial because it ensures that the EMI scheme is targeted towards smaller, growth-oriented companies that can benefit from offering share options to employees, without the complexities and regulations that apply to larger entities. The £30 million threshold for gross assets is fundamental in maintaining the integrity of the EMI scheme, as it encourages businesses with the potential for growth to provide incentives to their employees, thereby aligning employees' interests with those of the company. This provision creates an environment in which employees can be rewarded for their contributions to the company's success through ownership stakes. Understanding the conditions under which EMI operates is important for both employers and employees, as it delineates who can take advantage of these tax-efficient share options. The eligibility for EMI is restricted to companies that meet specific criteria, including the size of their gross assets, thereby fostering a focus on small to medium-sized enterprises.