ETASSUM52070 | Enterprise Management Incentives (EMI): Qualifying companies: Number of employees requirement

Paragraph 12A, Schedule 5 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)

From 6 April 2026, at the date on which a qualifying EMI option is granted, a qualifying company must have fewer than:

• 500 full-time equivalent employees, or

• 250 full-time equivalent employees - where the employer company is a Specified Company

The limit for options granted prior to 6 April 2026 remains 250 for all companies.

This requirement applies to employees of the company and all its qualifying subsidiaries, whether or not the employees are based in the UK. Directors are counted as employees for the purpose of this test, but students on vocational training, and employees on maternity or paternity leave at the time an option is granted are not to be counted. Apprentices are also excluded from the definition of employees for this test, if in accordance with general legislation on employment law they are not regarded as employees.

A full-time employee is someone whose standard working week (excluding lunch breaks and overtime) is at least 35 hours. Any employee who worked longer than those hours would still only count as one full-time employee. Where there are part-time employees, their full-time equivalence can be calculated on any “just and reasonable” basis. For example, someone working 21 hours a week would be expected to count as 60% of a full-time employee. Someone working ‘one week on, one week off’ would count as 50%, while the proportion of an employee working in term times only would depend on the length of those terms in relation to the year as a whole.

Seasonal employees

The number of employees of some companies (or groups) may vary over the course of a year. In these situations, there is no need to calculate some kind of average figure, the test is whether the limit of 500/250 full-time employees or their equivalents is met on the day the options are granted.