CSOP vs EMI: Which Share Scheme Is Right for Your Business?

EMI and CSOP are the two main tax-advantaged share option schemes available to UK companies. Both offer no income tax on exercise and 10% CGT on disposal — but they have different limits, eligibility requirements, and use cases.

This guide compares EMI and CSOP side by side, helping you decide which scheme is right for your business.

EMI vs CSOP: Quick Comparison

Feature	EMI	CSOP
Per-employee limit	£3 million	£60,000
Company size limit	< 250 employees, < £30m gross assets	None
Company type	Unlisted trading companies only	Any company (listed or unlisted)
Selective	Yes (can choose employees)	Yes
Exercise price	At or above market value at grant	At or above market value at grant
Income tax on exercise	No (if price ≥ MV at grant)	No (if price ≥ MV at grant)
CGT on disposal	10% BADR	10% BADR
HMRC approval	No (self-certify)	No (self-certify from 2023)
Advance Assurance	Yes	No (post-transaction check available)
92-day notification	Yes	No
Annual return	Yes	Yes
Disqualifying events	Yes (company ceases to qualify)	No

When to Choose EMI

EMI is the best choice for most qualifying companies. Here's why:

1. Higher Per-Employee Limit

EMI allows up to £3 million per employee (based on market value at grant), compared to CSOP's £60,000. For senior employees or key hires, the higher limit is essential to provide meaningful incentives.

2. More Tax-Efficient

EMI offers the same tax advantages as CSOP (no income tax on exercise, 10% BADR on disposal), but with a much higher limit. This makes EMI significantly more tax-efficient for larger awards.

3. Flexibility

EMI options can be granted at any exercise price (including nil), with flexible vesting conditions. CSOP options must be granted at or above market value, with exercise restrictions (exercise cannot be within 3 years of grant, or more than 10 years after grant).

4. No HMRC Plan Approval

EMI does not require HMRC plan approval (the company self-certifies). CSOP also no longer requires HMRC plan approval (since April 2023), but the plan rules must still meet the statutory CSOP requirements.

5. Advance Assurance

EMI offers the Advance Assurance process, allowing the company to obtain certainty on the share valuation before granting options. CSOP does not have an Advance Assurance process (though a post-transaction valuation check is available).

When to Choose CSOP

CSOP is the alternative when the company does not qualify for EMI. Here's when CSOP is the better choice:

1. Company Is Too Large for EMI

EMI is only available to companies with fewer than 250 employees and gross assets below £30 million. If your company exceeds either limit, EMI is not available, and CSOP is the alternative.

2. Company Is Listed

EMI is only for unlisted companies (AIM counts as unlisted for EMI purposes). If your company is listed on a main stock exchange, EMI is not available, and CSOP is the alternative.

3. Non-Qualifying Activities

EMI is not available to companies engaged in certain activities (banking, insurance, property development, farming, shipbuilding). CSOP does not have these restrictions.

4. Awards Below £60,000

If the awards are below £60,000 per employee, CSOP may be sufficient. CSOP provides the same tax advantages as EMI (no income tax on exercise, 10% BADR on disposal) for awards up to £60,000.

Key Differences in Practice

Exercise Price

• EMI: The exercise price can be set at any level (including nil), as long as it's at or above market value at grant. If the exercise price is below market value, income tax is due on exercise on the difference.
• CSOP: The exercise price must be at or above market value at grant. If it's below market value, the options are not qualifying CSOP options.

Vesting and Exercise

• EMI: EMI options can have any vesting conditions (time-based, performance-based, or both). The exercise period is set by the plan rules (typically 10 years from grant).
• CSOP: CSOP options cannot be exercised within 3 years of grant or more than 10 years after grant. The exercise period is fixed (3-10 years from grant).

Compliance

• EMI: Requires 92-day notification of each grant to HMRC, annual returns, and ongoing compliance with the qualifying company conditions.
• CSOP: Requires annual returns. No 92-day notification. Since April 2023, no HMRC plan approval is required (the company self-certifies).

Disqualifying Events

• EMI: If the company ceases to be a qualifying company (e.g., gross assets exceed £30 million, the company is acquired, or the company lists on a stock exchange), a disqualifying event occurs. Employees have 90 days to exercise their EMI options to preserve the tax advantages.
• CSOP: There are no disqualifying events for CSOP. Once the options are granted, they remain qualifying (regardless of changes to the company's status).

Can You Use Both EMI and CSOP?

Yes. A company can operate both EMI and CSOP schemes simultaneously. This is common for companies that want to:

• Grant larger awards (above the CSOP £60,000 limit) to senior employees using EMI
• Grant smaller awards (below the CSOP £60,000 limit) to other employees using CSOP

However, an employee cannot hold both EMI and CSOP options over the same shares. The EMI and CSOP limits are separate — an employee can have up to £3 million of EMI options and up to £60,000 of CSOP options.

EMI and CSOP vs Other Share Schemes

In addition to EMI and CSOP, there are other tax-advantaged share schemes:

• SAYE (Sharesave): An all-employee savings-linked option scheme. Employees save £5-£500 per month for 3, 5, or 7 years, receive a tax-free bonus, and can buy shares at a discount (up to 20%).
• SIP (Share Incentive Plan): An all-employee share acquisition scheme. Employees can receive free shares (up to £3,600/yr), buy partnership shares from pre-tax salary (up to £1,800/yr), and receive matching shares (up to 2:1). SIPs are the most tax-advantaged scheme (no income tax, NIC, or CGT on shares held for 5+ years).
• Unapproved options: No tax advantages, but no limits or qualifying company requirements. Used for awards above the EMI/CSOP limits or for companies that don't qualify.
• Growth shares: A special class of shares with a hurdle (they only have value if the company grows). Growth shares can be acquired at a low market value, with future growth taxed as capital gains (10% BADR) rather than income.

How to Decide: A Decision Tree

1. Does the company qualify for EMI?

   • Fewer than 250 employees? Gross assets below £30 million? Unlisted trading company?
   • If yes → EMI is likely the best choice (higher limit, more flexible)
   • If no → Continue

2. Is the award above £60,000 per employee?

   • If yes and the company qualifies for EMI → Use EMI
   • If yes and the company doesn't qualify for EMI → Use unapproved options or growth shares
   • If no → Continue

3. Does the company want an all-employee scheme?

   • If yes → Consider SAYE or SIP alongside EMI/CSOP
   • If no → Continue

4. Use CSOP for awards below £60,000

   • CSOP provides the same tax advantages as EMI for awards up to £60,000

How Newshams Can Help

At Newshams Tax Advisers, we provide end-to-end share scheme support:

• Assessment of which scheme is right for your company (EMI, CSOP, or a combination)
• Eligibility assessment for EMI
• Share valuation and Advance Assurance application (for EMI)
• Plan rules drafting (in conjunction with your solicitor)
• Grant process management
• Compliance (92-day notifications, annual returns)
• Ongoing compliance monitoring

Book a consultation to discuss your share scheme, or contact us for an informal discussion.

Frequently Asked Questions

What is the difference between EMI and CSOP? EMI has a £3 million per-employee limit and is only for unlisted trading companies with fewer than 250 employees and gross assets below £30 million. CSOP has a £60,000 per-employee limit and is available to any company (listed or unlisted).

Can I use both EMI and CSOP? Yes. A company can operate both EMI and CSOP schemes simultaneously. An employee can have up to £3 million of EMI options and up to £60,000 of CSOP options.

Which is more tax-efficient, EMI or CSOP? Both offer the same tax advantages: no income tax on exercise (if exercise price ≥ market value at grant) and 10% BADR on disposal. However, EMI has a much higher limit (£3 million vs £60,000), making it more tax-efficient for larger awards.

Does EMI require HMRC approval? No. EMI does not require HMRC plan approval — the company self-certifies. However, the company must notify HMRC of each grant within 92 days, and the plan rules must meet the statutory EMI requirements.

What happens if my company outgrows EMI? If your company exceeds the EMI limits (250 employees or £30 million gross assets), a disqualifying event occurs. Employees have 90 days to exercise their EMI options to preserve the tax advantages. After that, new options can be granted under CSOP.