The benefit of using an EMI Scheme, rather than just giving share options to employees via private agreements, is that under the EMI Scheme employees can receive tax benefits when the time comes to convert the share options into actual shares and hopefully sell them.

The flip-side to this is that if you want these tax benefits, then you need to jump through HMRC’s hoops to guarantee access to them. The two principal hoops are (1) getting HMRC to approve your company valuation ahead of your EMI Scheme, and (2) registering your scheme with them after you have granted options under it.

Here we talk about hoop 1 – the valuation.


The Difference between an EMI Scheme Valuation and an Investment Valuation

For your investors, you want your shares to be valued as high as possible, but for an EMI Scheme, it is the total opposite. You want your valuation to be as low as possible, so that the employees on the scheme can maximise their gain when the options are exercised/shares are sold.

On the one hand, this means less money for the company when employees exercise their options – but ultimately, the purpose of the scheme is to incentivise employees, not to receive investment from them beyond the time they have already committed to the growth of your company.


Why get the valuation? Is it compulsory?

It is not compulsory. However, getting an HMRC approved valuation means that you and your employees have certainty that the value ascribed to your options is approved for tax purposes. This means that you have certainty that the tax benefits of the EMI Scheme will apply, provided all other processes and formalities are followed.

Otherwise, you run the risk that when the time comes to benefit from the share options, that HMRC could refuse to grant the relevant tax benefits.


The Step by Step Process

Step 1Valuation Cover Letter

Prepare a valuation cover letter to send to HMRC – email for support with your valuation cover letter.

Step 2VAL231 Form

Fill out your VAL231 form and sign it, based on your valuation. Access the form here:

Remember that this form refers to 2 types of share value:

  • Unrestricted Market Value (UMV) – this is the value of the shares linked to the options as if no other restrictions existed on them, and that they could be readily sold at today’s date.
  • Actual Market Value (AMV) – this is will be the same or lower than the UMV, because it does take into account all the real life factors – for example that the shares cannot just be openly traded on the open market and that they are just a small portion of a much larger share pool. This is the relevant value for tax purposes.

Step 3 – Submit your Documents

Send your valuation cover letter, together with your signed VAL231 form to HMRC either:

  • by email to, or
  • by post to: Shares and Assets Valuation, HM Revenue and Customs, BX9 1BJ

Step 4 – HMRC Response and Prepare Documents

Then, you need to wait for HMRC to respond, either by approving or rejecting your valuation.

In the meantime though, you can be preparing and finalising the documentation for the EMI Scheme and have it ready to press ‘go’ once HMRC responds.


How long does the valuation last once HMRC approve it?

Approved EMI Scheme valuations will remain valid for 90 days from the date HMRC approves it, although this may be extended by a month or more on request to HMRV. You can contact them by calling the Shares and Assets Valuation department (SAV) on 0300 123 1082 or by writing to them at the above address.

However, if your company goes through a significant change which could reasonably impact your valuation (e.g. a fundraising) before share options are ultimately granted, then you would need to reapply – even within the 90 days.

Therefore, it is important to issue the share options before any such significant change takes place. For a fundraising, you should ensure you grant your share options (by entering into binding share option agreements.


Concluding your EMI Scheme

Once you have your valuation, you can conclude your share option rules and agreements with employees, and register any options granted with HMRC. For full information on the steps required to complete adoption of your EMI Scheme, click here.

Get in touch to if you want to implement your EMI Scheme using Legal Sidekick, through a cost-efficient combination of automating your core documents, and being supported every step of the way by our expert support team so you know you are doing it right!


This Step by Step Guide was written by Legal Sidekick. Legal Sidekick is the legal platform for startups. We offer automated contracts and loads of startup legal resources and guides. For EMI Scheme and share option support, and other legal queries, contact us any time.





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