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UK EMI Share Option Agreement
Draft a UK Enterprise Management Incentives (EMI) share option agreement under Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003 — the most popular tax-advantaged share scheme for UK growth companies. Includes the 2026 Finance Bill reforms in force from 6 April 2026: gross assets limit £30m → £120m, employee count 250 → 500, company-wide cap £3m → £6m, exercise period 10 → 15 years. The £250,000 per-employee cap is unchanged. Expert mode adds good leaver / bad leaver, performance conditions, exit acceleration (single / double trigger), drag-along, anti-dilution, disqualifying events under paragraphs 46-52 Schedule 5, and HMRC valuation via Form VAL231.
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EMI SHARE OPTION AGREEMENT
Enterprise Management Incentives (EMI) — Schedule 5 ITEPA 2003 · Stratus Compute Limited · 4 June 2026
COMPANY
Stratus Compute Limited (Company No. 13892054)
Unit 7, Discovery Park, Sandwich, Kent CT13 9FF
OPTIONHOLDER (EMPLOYEE)
Ms Rachel Sophia Walker
24 Cardamon Mews, Bermondsey, London SE1 5HW
EMI Option Grant — 50,000 shares to Ms Rachel Sophia Walker
Grant Date 4 June 2026 · Exercise £2.45/share
THIS AGREEMENT is made on 4 June 2026 between Stratus Compute Limited, a company incorporated in England and Wales (Company No. 13892054), of Unit 7, Discovery Park, Sandwich, Kent CT13 9FF (the "Company") and Ms Rachel Sophia Walker, the Company's Head of Customer Engineering, of 24 Cardamon Mews, Bermondsey, London SE1 5HW (the "Optionholder").
The Company has determined that it is a qualifying company for the Enterprise Management Incentives scheme under Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003 (the "EMI Scheme") and grants the Optionholder a qualifying EMI option on the terms set out below.
The Company has determined that it is a qualifying company for the Enterprise Management Incentives scheme under Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003 (the "EMI Scheme") and grants the Optionholder a qualifying EMI option on the terms set out below.
1. Grant of EMI Option. Subject to the terms of this Agreement and to the qualifying conditions in Schedule 5 ITEPA 2003 being met, the Company hereby grants to the Optionholder the right (the "Option") to acquire 50,000 Ordinary £0.0001 each (B Ordinary Shares — non-voting) shares in the Company at an exercise price of £2.45 per share (total exercise price £122,500). The Option is granted under the EMI Scheme and is intended to be a "qualifying option" within the meaning of paragraph 1 of Schedule 5 ITEPA 2003.
2. Vesting and exercise. 25% of the Option vests on the first anniversary of the Vesting Commencement Date (the "Cliff Date"). Thereafter, 1/36th of the remaining 75% vests monthly over the subsequent 36 months, such that the Option is fully vested 4 years from the Vesting Commencement Date.
2.1 Cliff period: The Option is subject to a cliff of 12 months from the Grant Date before any portion vests. Vesting accelerates as set out in clause 5 below.
The Option is exercisable in whole or in part during the Exercise Period, which ends 15 years from the Grant Date (the maximum permitted under Schedule 5 ITEPA 2003 for options granted on or after 6 April 2026).
2.1 Cliff period: The Option is subject to a cliff of 12 months from the Grant Date before any portion vests. Vesting accelerates as set out in clause 5 below.
The Option is exercisable in whole or in part during the Exercise Period, which ends 15 years from the Grant Date (the maximum permitted under Schedule 5 ITEPA 2003 for options granted on or after 6 April 2026).
3. EMI Qualifying Conditions — Schedule 5 ITEPA 2003.
3.1 Qualifying company. The Company confirms that, at the Grant Date, it satisfies the qualifying conditions in paragraphs 8-18 of Schedule 5 ITEPA 2003, including: (a) gross assets not exceeding £120 million; (b) fewer than 500 full-time-equivalent employees; (c) carrying on a qualifying trade in the United Kingdom; (d) independence (not a 51% subsidiary); and (e) a UK permanent establishment.
3.2 Qualifying employee. The Optionholder confirms that, at the Grant Date, they satisfy the working time requirement under paragraph 26 Schedule 5 ITEPA 2003 (at least 25 hours per week or 75% of their working time for the Company), and are not a material shareholder under paragraph 28 (>30% beneficial ownership).
3.3 Qualifying option. The parties confirm that the Option satisfies the qualifying option conditions under paragraphs 36-44 Schedule 5 ITEPA 2003, including: (a) total unexercised value per individual not exceeding £250,000 at the Grant Date; (b) total unexercised value across the Company not exceeding £6 million; and (c) exercise period not exceeding 15 years.
3.4 HMRC notification. The Company shall notify the grant of the Option to HM Revenue and Customs via the Employment-Related Securities (ERS) Online Service within 92 days of the Grant Date in accordance with paragraph 44 Schedule 5 ITEPA 2003. The Company confirms that the ERS Online Service filing has been or will be made within the 92-day window. Failure to notify within the 92-day window means the Option is NOT a qualifying EMI option.
3.1 Qualifying company. The Company confirms that, at the Grant Date, it satisfies the qualifying conditions in paragraphs 8-18 of Schedule 5 ITEPA 2003, including: (a) gross assets not exceeding £120 million; (b) fewer than 500 full-time-equivalent employees; (c) carrying on a qualifying trade in the United Kingdom; (d) independence (not a 51% subsidiary); and (e) a UK permanent establishment.
3.2 Qualifying employee. The Optionholder confirms that, at the Grant Date, they satisfy the working time requirement under paragraph 26 Schedule 5 ITEPA 2003 (at least 25 hours per week or 75% of their working time for the Company), and are not a material shareholder under paragraph 28 (>30% beneficial ownership).
3.3 Qualifying option. The parties confirm that the Option satisfies the qualifying option conditions under paragraphs 36-44 Schedule 5 ITEPA 2003, including: (a) total unexercised value per individual not exceeding £250,000 at the Grant Date; (b) total unexercised value across the Company not exceeding £6 million; and (c) exercise period not exceeding 15 years.
3.4 HMRC notification. The Company shall notify the grant of the Option to HM Revenue and Customs via the Employment-Related Securities (ERS) Online Service within 92 days of the Grant Date in accordance with paragraph 44 Schedule 5 ITEPA 2003. The Company confirms that the ERS Online Service filing has been or will be made within the 92-day window. Failure to notify within the 92-day window means the Option is NOT a qualifying EMI option.
4. Leaver provisions.
4.1 Good leaver: A "Good Leaver" is an Optionholder who ceases to be an employee by reason of (a) death; (b) ill-health incapacity; (c) retirement at or after the agreed retirement age; (d) redundancy; (e) the Company's breach of contract; or (f) any other circumstance the Board determines in its absolute discretion to be a good-leaver event. A Good Leaver retains the vested portion of the Option and has 12 months from the leaving date (or such longer period as the Board may agree) within which to exercise the vested Option.
4.2 Bad leaver: A "Bad Leaver" is an Optionholder who ceases to be an employee by reason of (a) summary dismissal for gross misconduct; (b) resignation without good cause; (c) breach of any restrictive covenant under the Optionholder's employment contract; or (d) any other circumstance the Board determines to be a bad-leaver event. The Option (whether vested or unvested) shall lapse immediately on the leaving date, save that the Board may, in its absolute discretion, permit the Optionholder to retain the vested portion subject to such conditions as the Board may impose.
4.1 Good leaver: A "Good Leaver" is an Optionholder who ceases to be an employee by reason of (a) death; (b) ill-health incapacity; (c) retirement at or after the agreed retirement age; (d) redundancy; (e) the Company's breach of contract; or (f) any other circumstance the Board determines in its absolute discretion to be a good-leaver event. A Good Leaver retains the vested portion of the Option and has 12 months from the leaving date (or such longer period as the Board may agree) within which to exercise the vested Option.
4.2 Bad leaver: A "Bad Leaver" is an Optionholder who ceases to be an employee by reason of (a) summary dismissal for gross misconduct; (b) resignation without good cause; (c) breach of any restrictive covenant under the Optionholder's employment contract; or (d) any other circumstance the Board determines to be a bad-leaver event. The Option (whether vested or unvested) shall lapse immediately on the leaving date, save that the Board may, in its absolute discretion, permit the Optionholder to retain the vested portion subject to such conditions as the Board may impose.
5. Performance conditions. Vesting is conditional on the satisfaction of the following performance conditions:
Vesting of the third and fourth annual tranches (years 3 and 4) is conditional on the Company achieving annual recurring revenue (ARR) of (a) £8 million by the end of the third anniversary; and (b) £15 million by the end of the fourth anniversary. The Board shall confirm satisfaction of these conditions by reference to the audited management accounts.
Vesting of the third and fourth annual tranches (years 3 and 4) is conditional on the Company achieving annual recurring revenue (ARR) of (a) £8 million by the end of the third anniversary; and (b) £15 million by the end of the fourth anniversary. The Board shall confirm satisfaction of these conditions by reference to the audited management accounts.
6. Exit acceleration. On an Exit Event (defined below), the Option shall vest in full and become immediately exercisable. Single-trigger acceleration: 100% of the unvested Option vests immediately on the occurrence of an Exit Event. Where an Exit Event involves a continuation of the Optionholder's employment with the acquiring party, the Board may, in its discretion, apply double-trigger acceleration — 100% vesting only on the combination of an Exit Event AND involuntary termination of employment within 12 months of completion.
An "Exit Event" means: (a) a sale of all or substantially all of the share capital of the Company; (b) a sale of all or substantially all of the business and assets of the Company; (c) an initial public offering of the Company's shares on a recognised stock exchange; or (d) a winding up of the Company.
An "Exit Event" means: (a) a sale of all or substantially all of the share capital of the Company; (b) a sale of all or substantially all of the business and assets of the Company; (c) an initial public offering of the Company's shares on a recognised stock exchange; or (d) a winding up of the Company.
7. Drag-along and anti-dilution.
7.1 Drag-along: On a sale of 50% or more of the Company's issued share capital to a bona fide arm's-length purchaser, the Optionholder shall, if required by the holders of a majority of the Company's ordinary shares, exercise the vested Option and transfer the resulting shares to the purchaser on the same terms as the sale, subject to standard tag-along protection for minority holders.
7.2 Anti-dilution: In the event of a sub-division, consolidation, capitalisation issue, or other variation of the Company's share capital not involving an issue for new consideration, the number of shares under the Option and the exercise price shall be adjusted as the Board determines (acting with the advice of the Company's auditors) to be fair and reasonable, subject to confirmation that no disqualifying event under Schedule 5 ITEPA 2003 arises.
7.1 Drag-along: On a sale of 50% or more of the Company's issued share capital to a bona fide arm's-length purchaser, the Optionholder shall, if required by the holders of a majority of the Company's ordinary shares, exercise the vested Option and transfer the resulting shares to the purchaser on the same terms as the sale, subject to standard tag-along protection for minority holders.
7.2 Anti-dilution: In the event of a sub-division, consolidation, capitalisation issue, or other variation of the Company's share capital not involving an issue for new consideration, the number of shares under the Option and the exercise price shall be adjusted as the Board determines (acting with the advice of the Company's auditors) to be fair and reasonable, subject to confirmation that no disqualifying event under Schedule 5 ITEPA 2003 arises.
8. Disqualifying events. The parties acknowledge that the qualifying EMI status of the Option may be lost on the occurrence of a "disqualifying event" within paragraphs 46-52 of Schedule 5 ITEPA 2003, including: (a) the Company ceasing to carry on a qualifying trade; (b) the Company becoming a 51% subsidiary of another company; (c) the Optionholder ceasing to meet the working time requirement; (d) a material variation in the terms of the Option; (e) a variation of share capital; or (f) conversion of the qualifying shares. On a disqualifying event, the Option must be exercised within 90 days to preserve the EMI tax treatment; otherwise income tax / NICs apply on the gain between the market value at the date of disqualification and the exercise price.
9. HMRC valuation. The parties confirm that the unrestricted market value of the qualifying shares at the Grant Date has been agreed with HMRC Shares and Assets Valuation under reference HMRC SAV-VAL231-2026-04829. The exercise price is set at not less than the agreed market value, securing the tax-advantaged treatment of the qualifying EMI option.
10. Governing law. This Agreement is governed by the law of England and Wales and shall be construed in accordance with the Companies Act 2006 share allotment framework (Part 17) and the Schedule 5 ITEPA 2003 qualifying conditions framework. Any variation requires the written consent of both parties and may give rise to a disqualifying event for EMI purposes.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date indicated.
SIGNED FOR AND ON BEHALF OF THE COMPANY
Mr Christopher James Marshall
Chief Executive Officer and Director · 4 June 2026
Date: ____________________
SIGNED BY THE OPTIONHOLDER
Ms Rachel Sophia Walker
Optionholder · 4 June 2026
Date: ____________________
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What Is a UK EMI Share Option Agreement?
An Enterprise Management Incentives (EMI) share option agreement is the UK's most popular tax-advantaged share scheme for early-stage and growth-stage companies. It allows a qualifying UK company to grant share options to qualifying employees on highly favourable tax terms — typically no income tax or National Insurance contributions on grant or exercise (provided the exercise price is at least market value at grant), with Capital Gains Tax (potentially at the Business Asset Disposal Relief rate of 10% up to a £1 million lifetime limit) on the eventual gain. EMI is the gold-standard UK retention and incentive tool for technology, life sciences, and other high-growth British companies.
EMI is governed by <em>Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003</em> and HMRC's ETASSUM50000 EMI manual. Three concurrent qualifying tests must be satisfied: (1) the COMPANY must be a qualifying company — a qualifying trade carried on in the United Kingdom, independent (not a 51% subsidiary), with gross assets and employee numbers below the statutory limits, and a UK permanent establishment; (2) the EMPLOYEE must work at least 25 hours per week (or 75% of their working time) for the company and not be a material shareholder (>30%); (3) the OPTION must be a qualifying option — over ordinary, fully-paid, non-redeemable shares, with exercise period within the statutory limit, individual and company caps observed, and HMRC notification within 92 days of grant.
The Finance Bill 2025-26 introduced major reforms to the EMI scheme with effect from 6 April 2026. The qualifying company gross assets limit increases from £30 million to <strong>£120 million</strong> — a four-fold expansion. The employee count limit increases from 250 to <strong>500</strong> full-time-equivalent employees. The company-wide cap on unexercised options doubles from £3 million to <strong>£6 million</strong>. The maximum exercise period extends from 10 to <strong>15 years</strong>. The £250,000 per-employee individual cap is unchanged. These reforms substantially expand the population of UK companies eligible for EMI and substantially expand the size and term of options that can be granted — a major boost for UK scale-up retention and recruitment.
What's Covered in This Template
Our UK EMI Share Option Agreement template generates a Schedule 5 ITEPA 2003-compliant grant aligned with the 2026 reforms.
Company + Director Signatory
Qualifying UK company, Companies House number, registered office, signing director with title.
Employee (Optionholder) Details
Name, address, role — qualifying employee under Schedule 5 ITEPA 2003 paragraphs 24-29.
Grant Date + Number of Shares + Class
Grant date, number of shares, share class (typically Ordinary or B Ordinary non-voting growth shares).
Exercise Price + Vesting Schedule
Exercise price per share (at or above market value for no income tax on exercise), 4-year vesting with 12-month cliff is the UK norm.
2026 Reform — £120m / 500 / £6m / 15y
Post-April 2026 limits: gross assets £120m, 500 employees, company cap £6m, exercise period 15 years. Pre-April 2026: £30m / 250 / £3m / 10y.
Three Qualifying Tests Confirmation
Qualifying company + qualifying employee + qualifying option — all three must be confirmed in writing in the agreement.
92-Day HMRC Notification
Mandatory notification to HMRC via the Employment-Related Securities (ERS) Online Service within 92 days of grant.
Good Leaver / Bad Leaver (Expert)
Death, ill-health, redundancy, retirement → Good Leaver, vested options retained. Summary dismissal, breach of covenant → Bad Leaver, options lapse.
Performance Conditions (Expert)
Tie vesting to ARR, EBITDA, KPIs — Board determines satisfaction by reference to audited management accounts.
Exit Acceleration + Drag-Along (Expert)
Single / double trigger acceleration on exit; drag-along compelling participation in majority sale; tag-along for minority protection.
Disqualifying Events Paras 46-52 (Expert)
Trade cessation, 51% subsidiary, working time failure, material variation, share capital variation — option must be exercised within 90 days to preserve EMI tax treatment.
HMRC Valuation Form VAL231 (Expert)
Shares and Assets Valuation agreement provides certainty on unrestricted market value at grant — key for the no-income-tax-on-exercise tax treatment.
How to Create a UK EMI Share Option Agreement
Follow these steps to grant a qualifying EMI option under Schedule 5 ITEPA 2003.
- 1
Confirm the Company is a Qualifying EMI Company
Check that the UK company satisfies the qualifying company conditions at the grant date — qualifying trade, gross assets within the limit (£120m from 6 April 2026; £30m before), employee count within the limit (500 from 6 April 2026; 250 before), independent (not a 51% subsidiary), with a UK permanent establishment. Enter the company name, Companies House number, registered office, and signing director details.
- 2
Identify the Qualifying Employee
Enter the employee's name, address, and role. Confirm they work at least 25 hours per week for the company (or 75% of their working time) under paragraph 26 Schedule 5 ITEPA 2003, and that they are not a material shareholder (>30% beneficial ownership) under paragraph 28. Both conditions must be satisfied at the grant date.
- 3
Set the Grant Terms — Shares, Price, Vesting
Enter the grant date, number of shares, share class (typically Ordinary or B Ordinary non-voting growth shares), exercise price per share (set at or above unrestricted market value for tax-advantaged exercise), and the vesting schedule (UK norm: 4 years with 12-month cliff, then monthly vesting). The exercise period is up to 15 years from 6 April 2026 (10 years before).
- 4
Confirm Qualifying Conditions and HMRC Notification
Confirm all three qualifying tests (company, employee, option) and the intention to notify HMRC via the Employment-Related Securities (ERS) Online Service within 92 days of grant. Failure to notify within the 92-day window means the option is NOT a qualifying EMI option and the tax-advantaged treatment is lost — this is the single most common drafting error.
- 5
Add Leaver, Exit, and Disqualifying Events Detail (Expert)
In Expert mode, define the good leaver and bad leaver categories, performance conditions (if any), exit acceleration mechanics (single / double trigger), drag-along provisions, and anti-dilution adjustments. Acknowledge the disqualifying events under paragraphs 46-52 Schedule 5 ITEPA 2003 and the 90-day window to exercise after a disqualifying event. Obtain HMRC valuation via Form VAL231 (Shares and Assets Valuation) for certainty on the market value at grant.
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Legal Considerations
EMI is the gold-standard tax-advantaged share scheme for UK growth companies — but the qualifying conditions are precise and the consequences of getting them wrong are material.
This template is for informational purposes only and does not constitute legal, tax, or financial advice. EMI is a technical area of UK tax and corporate law — consult a qualified UK corporate solicitor and a tax adviser before granting EMI options, particularly for material grants, complex share classes, or international employees.
Reviewed for England & Wales — Schedule 5 ITEPA 2003 + 2026 Finance Bill reforms
Schedule 5 ITEPA 2003 — The Three Qualifying Tests
EMI is governed by Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003. THREE concurrent tests must be satisfied at the grant date: (1) qualifying COMPANY — qualifying trade carried on in the UK, gross assets within the statutory limit, employee count within the statutory limit, independence (not a 51% subsidiary), UK permanent establishment; (2) qualifying EMPLOYEE — working time requirement (25 hours per week or 75% of working time), not a material shareholder (>30%); (3) qualifying OPTION — qualifying shares (ordinary, fully paid, non-redeemable), exercise period within the statutory limit, individual cap (£250,000), company-wide cap (within the statutory limit), HMRC notification within 92 days of grant. Failure of any one test removes the EMI tax-advantaged treatment.
2026 Reform — £120m / 500 / £6m / 15 Years
The Finance Bill 2025-26 introduced major EMI reforms with effect from <strong>6 April 2026</strong>: gross assets limit £30m → <strong>£120m</strong>, employee count 250 → <strong>500</strong>, company-wide cap £3m → <strong>£6m</strong>, exercise period 10 → <strong>15 years</strong>. The £250,000 per-employee individual cap is unchanged. These reforms substantially expand the universe of UK companies eligible for EMI and substantially expand the size and term of options that can be granted. Options granted before 6 April 2026 continue under the previous limits — the reforms apply to options granted on or after the commencement date.
HMRC Notification, ERS Online, and Form VAL231
Paragraph 44 of Schedule 5 ITEPA 2003 requires the granting company to notify HMRC of any EMI option grant via the Employment-Related Securities (ERS) Online Service within <strong>92 days</strong> of the grant date. Failure to notify within the 92-day window means the option is NOT a qualifying EMI option. HMRC Form VAL231 (Shares and Assets Valuation) is the optional but strongly-recommended advance valuation agreement — HMRC will agree the unrestricted market value at grant, providing certainty on the no-income-tax-on-exercise treatment. The valuation is typically valid for 90 days from agreement.
Disqualifying Events and the 90-Day Window
Paragraphs 46-52 of Schedule 5 ITEPA 2003 list the "disqualifying events" that end EMI qualifying status: (a) the company ceasing to carry on a qualifying trade; (b) becoming a 51% subsidiary; (c) the employee ceasing to meet the working-time requirement; (d) a material variation in the terms of the option; (e) a variation of share capital; (f) conversion of qualifying shares. On a disqualifying event, the option must be exercised within <strong>90 days</strong> to preserve the EMI tax treatment for the period up to the disqualifying event; otherwise income tax and NICs apply on the gain between the market value at the disqualifying event and the exercise price. Companies should monitor for disqualifying events on an ongoing basis throughout the option life.
Frequently Asked Questions
Grant Your UK EMI Share Options Now
Use our free template to draft a UK EMI Share Option Agreement compliant with Schedule 5 ITEPA 2003 and the 2026 Finance Bill reforms (£120m / 500 employees / £6m / 15-year exercise from 6 April 2026). Three qualifying tests, 92-day HMRC notification, good leaver / bad leaver, performance conditions, exit acceleration, drag-along, disqualifying events, and HMRC Form VAL231 valuation — all in one execution-ready agreement.
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