But in this year’s Budget small print, changes to the use of the Enterprise Management Incentive (EMI) – a tax-efficient share plan – appear set to have repercussions for retailers.
Hailed as one of the most tax-efficient share plans ever introduced by HMRC, EMI was intended to benefit entrepreneurial, high-growth companies – a description that fits many successful retailers.
In a nutshell, EMI enables employers to grant share options to their employees that will not affect income tax or national insurance contributions on exercise.
For businesses in the retail sector, EMI offers companies a means of motivating and retaining high performers, enabling competitive recruitment management succession, and giving senior managers an element of insurance against the effects of a potential takeover.
Positive measures in this year’s Budget on EMI included an increase from£100,000 to£120,000 on the value of options that an employee may hold, but there was a significant sting in the tail – one that will deal a blow to retailers that have taken advantage of this scheme.
In a sweeping change, which is expected to come into force in July, companies with more than 250 employees will cease to qualify for EMI. This change will have harsh consequences for businesses such as retailers that, out of necessity, have a large employee base that in many cases takes them over this threshold.
In an environment where attracting and retaining the best talent is becoming increasingly important for retailers, there is still a window of opportunity to take advantage of the present criteria on EMI and the new£120,000 value of options.
However, those retail businesses that have an established EMI scheme in place already, but will not continue to benefit under the new legislation, are also left with a headache and a void to fill with a replacement scheme for EMI.
In the face of rising living costs, an uncertain economy and faltering housing market, UK retailers are using increasingly inventive ways to persuade extremely cautious shoppers to part with their money.
This tenacity of individuals in the industry is testament to the depth of knowledge, skill and talent that exists within it. It is a time when retailers need to have determination to succeed, bolstered by external support wherever possible.
The broad-brush changes to the qualifying criteria for the EMI scheme will deal a costly blow to those retailers that use it as an attractive part of the package for their senior individuals.
By Rupert Eastell, head of retail, BDO Stoy Hayward.
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