ETASSUM56110 | Enterprise Management Incentives (EMI): Option notifications: Notice of enquiry

Paragraphs 46 & 49, Schedule 5 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)

An enquiry may be opened into an option, for example to deal with questions regarding the notification, or to check that the company is a qualifying company. In this case a notice of enquiry must be sent to the employer company (Paragraph 46(2)).

HMRC can also enquire into whether the employee who has been granted the option meets the working time commitment. The employee must be given notice of the enquiry and a copy of the notice must be given to the employer company (Paragraph 46(3)).

Where options are granted before 6 April 2024, HMRC may send a notice of enquiry at any time within the 12 month period, which begins after the end of the 92 day period in within which the employer was required to notify the grant of the option.

Where options are granted on or after 6 April 2024, HMRC may send a notice of enquiry at any time within the 12 month period, which begins after the 6 July following the end of the tax year in which the options were granted. (Paragraph 46(5)).

If it is discovered that information provided in or in connection with the notification of the grant of the option was false or misleading, a notice of enquiry can be issued at any time (Paragraph 46(6)).

An option that has been subject to one notice of enquiry may not be subject to another notice unless that further notice is issued because it is discovered that the notification of the grant of the option contained false or misleading information (Paragraph 46(7)).

If no enquiry is opened, the option is taken to meet the requirements of Schedule 5 except in circumstances in which the notification contains false or misleading information that has a material effect on the option, or where a disqualifying event has occurred. In such a scenario, the provisions of Paragraph 49(1) do not apply, and a notice of enquiry can still be given at any time in accordance with the provisions of Paragraph 46(6).

In addition, HMRC still has the right to enquire into the operation of an employer's payroll for a tax period and recover any additional Income Tax or NIC's liability resulting from EMI schemes, through PAYE and NIC's legislation. Please see PAYE54001 & PAYE54295 for further information.