• GL
Choose your location?
  • Global Global
  • Australia
  • France
  • Germany
  • Ireland
  • Italy
  • Poland
  • Qatar
  • Spain
  • UAE
  • UK

The impact of COVID-19 on share schemes

09 April 2020
If employers choose to furlough employees under the temporary Coronavirus Job Retention Scheme, it is important to understand the impact this could have on existing employee share schemes.

Due to the fast pace of change in regulation resulting from the COVID-19 pandemic, we strongly recommend that professional advice is sought in connection with the issues discussed in this article before any action is taken.

The Government has established the Coronavirus Job Retention Scheme ("JRS"). Under the JRS, employers can furlough employees and claim up to 80% of the furloughed employees usual monthly wage costs, up to £2,500 per month, plus associated employer national insurance contributions and minimum automatic enrolment pension contributions.

If employers take advantage of the JRS, it is important that they consider what impact furloughing employees may have on options granted under any existing employee share schemes (including tax advantaged share schemes like EMI or CSOP schemes).

The importance of the scheme rules

Many share scheme rules, including those for EMI schemes, as well as some options granted under CSOP schemes, will include employment or "working time" requirements which must be satisfied for the option to continue without lapsing or to ensure that it doesn't lose the tax advantaged status. 

It is important that share scheme rules are properly reviewed before furloughing employees holding share options to ensure that those share options do not inadvertently lapse as a result of furloughing. If a share option lapses this will usually result in the option being lost, together with any associated tax advantage.

Share option schemes may also include other rules that may be breached, directly or indirectly, as a result of employees being furloughed. For example, SAYE schemes will require an employee to make regular payments into the scheme. Under particular scheme rules, these may be required to continue during the furlough period, even if an employee is on a lower salary. If an employee fails to make payments under the SAYE scheme, this could be problematic depending on the rules of the scheme.

An extra issue for EMI schemes

The rules relating to EMI share options contain a statutory "working time" requirement. If the statutory "working time" requirement ceases to be met in respect of an EMI share option, this is treated as a "disqualifying event" and can result in the loss, or partial loss, of any tax advantage connected with the relevant EMI share option. 

Our initial analysis suggests that the risks associated with furloughing an employee with EMI share options will depend on the nature of that employee's employment and employment contract. Each case should be assessed separately to properly ascertain the risks posed by furloughing employees.

We consider that whilst the employees are not actively working for the employer they are still retained by the employer and could be called upon to work, if required, and brought out of furlough.  Accordingly, it would seem unreasonable that due to no fault of their own an employee's share option might lose its tax advantaged status.  

It is hoped that HMRC provide some guidance on the application of EMI "working time" requirement to furloughed employees, or publish an extra-statutory concession dealing with any "working time" issues caused. From what we understand, HMRC is aware of this issue, but have not yet issued any guidance in response to it. For now, it is important that the rules are reviewed carefully and any risks considered before the decision is made to furlough an employee holding share options.

Next steps

Please contact James Cashman or your usual DWF contact if you would like to discuss the impact of the new Coronavirus Job Retention Scheme on your existing employee share schemes, or the implications of establishing a new share scheme for your employees. 

Further Reading

We use cookies to give you the best user experience on our website. Please let us know if you accept our use of cookies.

Manage cookies

Your Privacy

When you visit any web site, it may store or retrieve information on your browser, mostly in the form of cookies. We mainly use this information to ensure the site works as you expect it to, and to learn how we can improve the experience in the future. The information does not usually directly identify you, but it can give you a more personalised web experience.
Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change permissions. However, blocking some types of cookies may prevent certain site functionality from working as expected

Functional cookies


These cookies let you use the website and are required for the website to function as expected.

These cookies are required

Tracking cookies

Anonymous cookies that help us understand the performance of our website and how we can improve the website experience for our users. Some of these may be set by third parties we trust, such as Google Analytics.

They may also be used to personalise your experience on our website by remembering your preferences and settings.

Marketing cookies

These cookies are used to improve and personalise your experience with our brands. We may use these cookies to show adverts for our products, or measure the performance of our adverts.