5 min read
Lucy Hoyle
Apr 28, 2023 10:08:02 AM

If you’ve spent any time at all in the UK startup ecosystem, chances are you’ve heard of the Enterprise Management Incentive scheme – more often known as EMI. HMRC reports that the number of UK companies offering tax-advantaged employee share schemes has risen by 88% since 2010, with EMI share plans acting as the main driver.

Despite its growing popularity, the topic itself remains fairly inaccessible, in part down to the terminology involved. Many startup employees will tell you they have share options; far fewer will be able to tell you exactly what that means. Even founders and execs without finance backgrounds may struggle to tell their AMV from their ERS.

Capdesk to the rescue: we’ve curated a glossary of essential terms to help everybody master the jargon associated with EMI schemes, whether you’re a junior employee or a time-poor founder. Bookmark this page and save yourself time and headspace when setting up your EMI share plan.

For terms that aren’t specific to EMI share plans, check out the original Capdesk Equity Glossary.

a-z strip op1

Actual market value (AMV)

A company’s share price, determined by valuing share options in light of certain restrictions found in shares issued to minority shareholders like employees. Restrictions include veto on transfers, risk of forfeiture and pre-emption provisions, among others.

Articles of association

Documentation that lays out rules for running a company, agreed upon by its shareholders, directors and company secretary. May include information on how shares are issued, what rights are granted to shareholders and how the option pool is authorised.

Board of directors

A group of individuals elected by a company’s shareholders to oversee its development and influence important decisions such as hiring and terminating the CEO. May include investors, mentors and C-suite executives.

During EMI plan setup, the board may need to pass a resolution concerning the incentive pool and share plan rules.

Board resolution

The formal record of an agreement or decision made by a company’s board of directors. Used to adopt an EMI share plan and authorise company management to issue options.

Capital gains tax (CGT)

A tax on the profit (‘gain’) made by disposing of an asset that has increased in value. Only applies to gains above the tax-free allowance. Each jurisdiction carries different tax rates and exclusions.

EMI options held for longer than two years entitle employees to a reduced 10% CGT rate at the point of sale.


A point in time after which employee equity on a vesting schedule begins to vest. Typically fixed at one year after the grant date.

Enterprise Management Incentive (EMI)

The UK’s most popular employee share scheme. It provides a tax-efficient means of rewarding, incentivising and retaining qualifying employees. Among other benefits, participants pay no tax upon exercising their options, and only 10% capital gains tax on selling their shares.

EMI annual return

A compulsory annual filing submitted to HMRC that lists out all the relevant changes to a company’s EMI scheme within the tax year. Due annually on the 6th of July.

EMI notification

A compulsory filing submitted to HMRC within 92 days of issuing new grants under an EMI scheme. Provides information about new grantholders, the number of options issued, vesting schedules and exercise prices. To be discontinued from April 2024.


The process of converting an option agreement’s underlying security, such as an employee purchasing company shares at the predefined strike price.

Exercise window

The window of time a former employee has to exercise their options after leaving a company. Exercise windows are set by the company and can range from 30 days to 10 years.


An agreement allowing the grantholder to purchase shares at a fixed price in the future. Options, warrants, share grants, RSUs and phantom or virtual shares are all grants.


Her Majesty’s Revenue and Customs, commonly abbreviated to HMRC. The UK government department responsible for collecting taxes from individuals and businesses. EMI and ERS annual returns are filed with HMRC.

HMRC valuation

An umbrella term for a company valuation approved by HMRC, for the purpose of issuing option grants under an EMI, CSOP or SIP scheme in the UK. It determines the lowest share price at which a company can issue options to its employees.

Incentive pool

A board-approved allocation of shares set aside by a company for employee equity awards. Also known as the option pool, it typically ranges between 10 and 20% of total company ownership.

Leaver, bad

An employee who leaves a company under specific circumstances, such as gross misconduct, which means they are longer entitled to any equity granted under an employee share scheme. Companies may set their own conditions for bad leavers.

Leaver, good

An employee who leaves a company under normal circumstances and has the right to purchase any vested shares within a fixed window. Exercise windows are typically set at 90 days from the employee’s departure.

Notice of exercise

Written notice of an grantholder’s desire to buy or sell the underlying security of their option contract. Also known as an exercise notice, this document specifies the number of options being converted.

Notice of option grant

A document given to each optionholder outlining the details specific to their issuance (e.g. the number of options granted, vesting schedule, exercise rules and strike price).


A type of equity award which gives the optionholder the right to buy a certain number of shares at a fixed price in the future.

Option agreement

A legal contract that details the conditions that the optionholder must meet in order to purchase shares, and explains the terms associated with the purchase.


A term used to signify a company valuation approved by HMRC. While it’s not essential to secure HMRC pre-clearance before issuing option grants, doing so benefits a company and its employees.

Share option plan rules

The blueprint for an employee share scheme. Sets out company policies including optionholders’ rights, the treatment of leavers and option lapsing. These rules apply to all employees on the scheme, and must be approved and adopted by the board of directors.

Share split

The process of dividing a share into two or more parts. The total value of the original share is unchanged, but split across multiple parts.

Shareholders' agreement

A document outlining shareholder rights and obligations, the relationship between shareholders, the financing and management of the company, and share-related policies. Designed to minimise disputes and protect shareholders in the event of a crisis.

Strike price

The price paid per share by an employee grantholder to exercise their shares.

Unapproved options

A type of grant that doesn’t need pre-clearance from local tax authorities and isn’t limited to employees of the company. Unapproved options don’t provide any specific tax advantages.

Unrestricted market value (UMV)

A company’s share price determined by valuing all shares as if they have no restrictions, presuming all shares can be sold equally easily.

To qualify for the EMI scheme, a company must not have allocated over £3M (UMV) worth of EMI shares.


The form submitted to HMRC in order to get an EMI valuation. Must include a proposed unrestricted market value and actual market value.


The process of earning an asset or equity award like share options. The grant is awarded over time according to a vesting schedule. When options are fully vested, the grantholder is entitled to the full grant.

Vesting schedule

A schedule which determines when a grantholder is entitled to their equity award. Typically begins with a cliff, after which shares vest at regular intervals for the duration of the schedule.


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