EMI Share Valuation: What Business Owners Need to Know

What an EMI share valuation answers

An EMI share valuation establishes the market value of the specific shares over which employee options will be granted. Restricted shares may require both Actual Market Value and Unrestricted Market Value. A company can ask HMRC Shares and Assets Valuation to agree proposed values using form VAL231. A free indicative whole-business valuation is not suitable for an EMI or HMRC submission. The subject is the actual share class and proposed option arrangement, not simply the business’s possible selling price. Before a valuation is commissioned, identify the intended grant date, the shares involved and the purpose of the instruction.

An Enterprise Management Incentive option gives an eligible employee a contractual right to acquire shares on the terms of the option. The exercise price, share rights, vesting conditions and leaver arrangements affect what the employee is being offered. A valuation helps establish the grant-date evidence used in applying the tax rules, but it does not design the scheme or confirm every condition of eligibility. The company, employee and option must each satisfy their relevant conditions. Our team first assesses the instruction and the supporting records; specialist tax and legal advice may be needed alongside the valuation work.

There are practical reasons to obtain a purpose-specific valuation before making promises to employees. Directors need to understand the relevant values, the available option headroom and the relationship between the exercise price and the shares being offered. Employees need understandable scheme documents rather than an informal claim about what an option will eventually be worth. The valuation date should align with the proposed grant and the information used should be appropriate to that date. A later successful exit cannot retrospectively establish that every earlier grant condition was met. Equally, a valuation is not a promise that the company will sell or that an employee will receive a particular return.

An EMI valuation is a formal share valuation for a specific tax purpose. It is different from an indicative estimate of what the whole business might sell for.

Actual Market Value and Unrestricted Market Value

Actual Market Value, or AMV, values the relevant shares taking account of restrictions and forfeiture risk that affect their market value. Unrestricted Market Value, or UMV, disregards those restrictions and forfeiture risk for the relevant statutory exercise. HMRC explains these concepts in ETASSUM57140 and requests both figures through VAL231 where restrictions affect the shares’ market value. AMV may be lower than UMV. There is no standard percentage difference: the documents, rights, restrictions and circumstances of the actual company must be considered. A restriction should not be assigned an invented discount merely because it appears in a familiar form of agreement.

The two values have different uses. UMV is relevant to testing the individual and company EMI option limits. The exercise price compared with AMV is relevant to whether an option is discounted for tax purposes. An exercise price below AMV does not automatically mean that the option cannot be an EMI option, but it can affect the tax position on exercise. That position requires advice on the actual grant, exercise and subsequent events. Setting an exercise price at a particular figure does not itself protect every element of the tax treatment, and an HMRC valuation agreement does not replace the wider eligibility analysis.

Unrestricted does not mean that the employee is treated as buying the entire company or that different economic rights disappear. A share class can have different dividend, voting, capital or preferential rights from other classes. The adviser must identify which rights belong to the shares and which restrictions are disregarded for the statutory valuation. Articles of association, shareholder agreements, option terms and capitalisation records therefore belong together in the evidence pack. If the documents disagree, or proposed rights have not yet been finalised, the instruction needs clarification before the figures can sensibly be relied upon.

From company value to the relevant shares

A whole-company valuation can be an important starting point, but dividing a headline figure by the number of shares is not always the complete analysis. Preference shares, growth shares, different voting rights, liquidation preferences, conversion rights and options can change how value is allocated. The capitalisation table should reconcile the issued shares and relevant potential dilution with the legal documents. Debt, cash and other appropriate adjustments also matter when moving from the value of the operating business to the equity attributable to shareholders. The valuation should explain the bridge and the allocation rather than present an unexplained per-share result.

The appropriate approach depends on the business and available evidence. An established profitable business may support an earnings-based assessment, while an asset-rich business may require an asset approach. A growth business may need forecasts, scenario analysis or recent investment evidence, with the assumptions and uncertainty clearly explained. Discounted cash flow is sensitive to forecast cash flows and risk assumptions; an earnings multiple is sensitive to the sustainability of earnings and the relevance of the comparison. No particular method is universally HMRC-approved for every company. A documented explanation of why the evidence is relevant matters more than choosing the method that produces the preferred exercise price.

Recent fundraising or share transactions can be useful evidence, especially where independent parties negotiated at arm’s length. However, an investor may have bought shares with rights that differ from employee shares, or invested alongside contractual protections that change the economic comparison. A small secondary transfer, a connected-party transaction or a strategic investment may need a different assessment. The adviser should consider the transaction date, terms, class and surrounding information. A funding-round headline valuation is not automatically the AMV or UMV of every other class, and there is no universal twelve-month rule that makes any recent investment price determinative.

Information to prepare

• Statutory accounts
• Current management accounts
• Financial forecasts and assumptions
• Business plan
• Capitalisation table
• Articles of association
• Shareholder agreements
• Existing and proposed options
• Proposed exercise price
• Share-class rights
• Restrictions and leaver provisions
• Recent investments and share transactions
• Current sale or investment discussions
• Debt and cash
• Material subsequent events

The adviser will confirm the required records and appropriate way to provide them; this is not a request to send sensitive documents in an initial enquiry.

HMRC, VAL231 and the conditional 90-day period

HMRC Shares and Assets Valuation can consider proposed EMI share values through form VAL231. The company should be in a position to grant the options before approaching SAV, and the application should provide the required financial and share information with the proposed values and supporting reasoning. HMRC may ask questions or propose a different view. There is no guaranteed turnaround in this guide. Build the board and grant timetable around the actual information requirements and response, rather than assume that a particular number of days from submitting the form will be sufficient. Confirm the scope of any adviser’s submission and query support before engaging them.

HMRC guidance states that an agreed EMI valuation is valid for 90 days from the agreement date, provided there is no change in company circumstances that might affect the value before the options are issued. If the options are not granted within that period, HMRC guidance calls for a fresh VAL231. The starting point is the agreement date, not the application date. The period is conditional: an agreement should not be treated as a safe harbour regardless of what happens to the company. Keep the agreement letter, the valuation evidence and the actual grant records together so the chronology can be checked.

A new investment, a share transaction, substantive sale negotiations, a major change in trading or another material development can require reassessment. These are examples of matters to discuss with the adviser, not an exhaustive statutory EMI checklist. The HMRC guidance uses the broader question of changes that might affect share value. Do not assume that a figure remains supportable merely because fewer than 90 days have elapsed. Conversely, expiry of an agreement does not by itself establish the tax treatment of an option already granted. The particular grant and agreement conditions need to be assessed, with full disclosure of relevant circumstances.

Advance valuation agreement is not mandatory general approval of an EMI scheme. It addresses the proposed share valuation within its terms; it does not certify company eligibility, employee working time, option documents, later exercise conditions or a future tax outcome. Scheme design, grant notification and annual reporting are separate responsibilities. A valuation adviser should be clear about which work is included and which tasks remain with the company and its tax or legal advisers. The company should maintain an ownership and option register and keep track of changes, rather than rely on a valuation report as if it were a complete compliance service.

Current eligibility headlines, historic grants and exceptions

For grants from 6 April 2026, HMRC guidance and Finance Act 2026 section 13 describe expanded limits for most eligible companies: £6 million of unexercised company-wide EMI options measured using UMV, gross assets not exceeding £120 million, and fewer than 500 full-time-equivalent employees. These are headline conditions, not a complete eligibility checklist. Group tests, independence, qualifying subsidiaries, the nature of the trade and the employee and option conditions also matter. A company inside the size thresholds is not automatically eligible. The thresholds must be applied at the relevant time and in the correct statutory context.

The specified Northern Ireland company exception needs separate consideration. HMRC describes specified companies registered in Northern Ireland and trading in goods or providing electricity as retaining the £3 million company option limit, £30 million gross-assets limit and fewer-than-250 employee test. The precise statutory definition and its application to a particular business should be checked by the adviser. Do not apply the expanded limits indiscriminately across all UK companies. Options granted before 6 April 2026 use their applicable historic grant-date limits. The individual £250,000 UMV limit has not been increased by these company-level changes and relevant CSOP awards and grant history need consideration.

HMRC also describes the qualifying exercise period increasing to 15 years for eligible non-specified companies, with rules for amending eligible existing options. Existing options do not automatically acquire new terms: their documents, status and the transitional conditions need review, and HMRC describes exercise on or after 6 April 2026 for the extension. Specified companies retain the relevant 10-year limit. Employee eligibility includes the applicable working-time and material-interest conditions. Excluded activities require checking against the detailed legislation and HMRC guidance; there is no blanket rule that all professional services are excluded. Mixed trades and subsidiaries need their own analysis rather than a simple sector label.

The official sources below were checked on 1 November 2026 for this preview resource. They must be rechecked immediately before publication or an instruction, particularly where grants cross a change date or the company falls within an exception. This page does not decide eligibility or provide advice on an individual’s tax liability. Unverified PISCES amendment details are not presented here as an operative rule. Transaction-specific tax advice is needed for exercise, disqualifying events, sale proceeds and relief claims; no tax-saving illustration or future tax rate is assumed in the valuation guidance.

Retention, sale preparation and management succession

EMI options can form part of a management retention and succession discussion, but the scheme needs to reflect the company’s commercial objectives and the employees’ actual roles. Vesting, exercise events, leaver provisions and dilution should be explained alongside the valuation. An option is not the same as immediate ownership, a cash bonus or a guaranteed future payout. Directors should avoid presenting a speculative future sale price as an employee’s expected return. The value and tax position at grant, exercise and disposal are distinct questions, and changes to option terms may require legal and tax review.

If a sale or investment is already under discussion, tell the valuation adviser. Negotiations and other relevant evidence can affect the information available at the grant date and the supportability of the proposed share values. Options granted while preparing for a sale need assessment of their terms, the current circumstances and the intended exercise event. An EMI scheme is not a shortcut around the commercial or legal work needed for a management buyout. The wider ownership structure, management capability, funding and seller objectives remain important. Where you are planning a future exit, an indicative whole-business estimate can support that separate planning discussion but cannot replace the EMI valuation.

To request an assessment, use the formal EMI enquiry below and explain the proposed grant, share class, valuation date and any deadline. You do not need to upload sensitive documents into the initial message. We will discuss the scope and the appropriate evidence pack, with fees, permitted use and timetable agreed before substantive work begins. If you already have scheme solicitors or tax advisers, identify their requirements early. The request is an invitation to assess the instruction, not a promise of HMRC agreement or confirmation that the company qualifies. Our specialist partner network can support complex requirements where an appropriate engagement is agreed.