Enterprise Management Incentive Share Valuations

EMI Share valuations: Getting the Best Value for Clients 

When it comes to Enterprise Management Incentive (EMI) share schemes, few things matter more than the accuracy and strategic optimisation of share valuations. It’s not just a technical exercise – it’s a pivotal part of unlocking long-term value and minimising tax exposure. At Burgess Hodgson, we don’t just tick boxes. We drive value by applying deep expertise, experience, and a rigorous understanding of HMRC’s expectations. 

Why Share Valuations Matter 

Under EMI schemes, companies can agree a share valuation with HMRC at the time of granting options. Whilst not mandatory, doing so offers peace of mind and clarity – particularly around the eventual tax implications for option holders. Put simply, a lower agreed valuation typically results in less Income Tax being paid when the options are exercised. That’s why a well-prepared valuation isn’t just a compliance exercise – it adds measurable financial value for both employers and employees. 

Let’s take a step back. If you exercise a share option at £0.01 and HMRC has agreed the value is £1, only £0.99 is subject to Income Tax. If the shares later sell for £10, the remaining gain is taxed more favourably under Capital Gains Tax rules. Now imagine the HMRC value had been agreed at £2 instead – suddenly, a larger portion of that gain is exposed to Income Tax, increasing the tax cost to the option holder.  

The Burgess Hodgson Advantage: Valuation Optimisation in Action 

We submit EMI share valuations to HMRC on a weekly basis. That frequency matters. It means our team is immersed in the process, with a constantly updated understanding of how HMRC approaches different scenarios. We know where HMRC tends to scrutinise, and more importantly, how to build robust cases that withstand HMRC review. Here’s how we consistently secure the best outcomes for our clients: 

1. Timing Is Everything 

HMRC places high importance on real share transactions when valuing a company. Recent transactions set strong precedents. That’s why, in certain circumstances, it pays to wait until those transactions are no longer deemed “recent.” Our team advises clients on timing strategies to avoid inadvertently anchoring valuations too high. 

2. Not All Shares Are Created Equal 

Different share classes carry different rights – especially in growth companies with shares with preferential liquidation or exit rights. It is important to ensure that the economic rights of these share classes, and the impact on valuation for the shares under option, are clearly understood. We carefully isolate the relevant class of shares and evidence their distinct economic characteristics to HMRC, ensuring our clients’ valuations reflect true, fair value – not inflated comparisons. 

3. Adjusted Earnings, Real-World Relevance 

Many valuations are based on a multiple of earnings. But what if the founder is underpaid or the company is investing heavily in growth? We identify these distortions and make legitimate adjustments to present a more accurate (and often lower) picture of sustainable earnings, directly impacting the final share value. 

4. Avoiding Pitfalls with 409A Valuations 

We often see 409A valuations (prepared under U.S. standards) mistakenly used to inform EMI valuations. Whilst useful in some contexts, these valuations typically apply different methodologies and often inflate value in the UK context. We ensure our valuations are prepared specifically for HMRC’s framework – avoiding unnecessary complexity or risk. 

A Partner, Not Just a Provider 

Burgess Hodgson isn’t simply a service provider – we’re strategic partners in maximising the value of EMI share option schemes. Our team blends technical tax knowledge with real-world commercial understanding. We guide clients from the first submission to HMRC to final agreement and beyond, always with one aim: securing the best possible tax position without compromising compliance. 

So, whether you’re an ambitious startup attracting key talent or a mature business rewarding long-term contributors, trust Burgess Hodgson to deliver expert guidance, meticulous valuations, and measurable results. 

Because in share valuations, detail is everything – and experience makes all the difference. 

Author – Tom Saltmer BBA FCA CTA