ETASSUM54020 | Enterprise Management Incentives (EMI): Requirements relating to options: Options capable of exercise within 10/15 years

Paragraph 36, Schedule 5 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)

It must be possible for a qualifying option to be exercised within:

• 10 years, or

• 15 years - where the employer company is a Specified Company

of the date of grant, but it does not have to be exercised within that period.

For example, if the exercise of the option depends on the fulfilment of performance conditions, it must be possible to fulfil those conditions within 10/15 years.

However, the option agreement does not have to prevent the employee from exercising the option after that time. If the employee does exercise the option more than 10/15 years after the date of grant, there will be no tax relief under Schedule 5 on the exercise. The tax relief on grant of the option will be unchanged.

For options granted prior to 6 April 2026, HMRC will allow the lapse date and exercise period of existing option agreements to be extended to take advantage of the new exercise period, provided that the option is exercised on or after 6 April 2026 and the option had not already lapsed, expired or been exercised at the time of variation. Please see ETASSUM50500 for more information.