Income Tax (Earnings and Pensions) Act 2003 section 37

Terms of option to be agreed in writing

Section 37 of Schedule 5 sets out the requirements for the written agreement that must be in place when granting an enterprise management incentives (EMI) share option to an employee.

• An EMI option must take the form of a written agreement between the company granting the option and the employee
• The agreement must state the grant date, that it is granted under Schedule 5, the number or maximum number of shares available, the price payable (or method of calculating it), and when and how the option may be exercised
• Any conditions affecting the employee's entitlement, such as performance conditions, must be clearly set out in the agreement
• Without a compliant written agreement in place, the option will not qualify for the favourable EMI tax treatment