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The short answer
A UK startup can grant EMI options to staff in Nigeria only if they are employees of the company or of a qualifying subsidiary and meet the working-time test: committed time of at least 25 hours a week, or 75% of their working time if less. Contractors and staff employed through an employer of record are not the company's employees, so they cannot hold EMI options. EMI allows options worth up to £250,000 per person in a three-year period; Nigerian tax on the options is a separate question.
Equity is one of the few things a young UK company can offer a senior developer in Lagos that a larger competitor cannot. EMI, the Enterprise Management Incentive scheme, is the UK's most generous option scheme, and founders naturally want to use it for the whole team. Whether it works for people in Nigeria depends less on where they live than on how they are engaged.
The employment test comes first
Paragraph 25 of Schedule 5 to the Income Tax (Earnings and Pensions) Act 2003 says that to be an eligible employee, an individual must be an employee of the company granting the option or, if that company is a parent, an employee of a qualifying subsidiary. In practice:
| How the Lagos team member is engaged | Can they hold EMI options? |
|---|---|
| Employed directly by the UK company | Potentially, if the other tests are met |
| Employed by the UK company's Nigerian subsidiary | Potentially, if the subsidiary is a qualifying subsidiary |
| Independent contractor invoicing the UK company | No: not an employee |
| Employed by an employer of record that bills you | No: their employer is the EOR, not your company or subsidiary |
| Contractor working through their own company | No |
This is often the deciding factor. Many UK startups hire in Nigeria through contractors or an employer of record precisely to avoid setting up a Nigerian company; see employer of record in Nigeria and hiring without an entity. Those routes rule out EMI.
The working-time test
Paragraph 26 requires the employee's average committed time to be at least 25 hours a week or, if less, 75% of their working time. Committed time is the time they are required to spend on the business of the company, or of the group if the company is a parent. A full-time developer employed by your Nigerian subsidiary normally passes; someone who works for you two days a week and runs their own business the rest of the week may not.
Company conditions and limits
GOV.UK's EMI page, updated 30 September 2026, sets out the headline rules:
- The company must have assets of £120 million or less and fewer than 500 full-time employees (before 5 April 2026 the limits were £30 million and 250).
- Companies in excluded activities, such as banking, farming, property development, legal services and ship building, cannot offer EMI.
- Options can be worth up to £250,000 per employee in a three-year period.
- There is no Income Tax or National Insurance when shares are bought at their market value at grant, within 10 or 15 years of the grant as the option agreement states.
- Capital Gains Tax may be due when the shares are sold.
The full legislation adds further company and trading conditions that the GOV.UK summary does not list; check the HMRC guidance or take advice before granting.
Worked example (illustrative)
Example: a Lagos engineer employed by the startup's Nigerian subsidiary is granted EMI options over 10,000 shares at an exercise price of £2, equal to market value at grant. The grant counts as £20,000 (10,000 × £2) towards the £250,000 limit. Four years later the shares are worth £8 and she exercises, paying £20,000 for shares worth £80,000. Under EMI there is no UK Income Tax on the £60,000 difference (£80,000 − £20,000) if the conditions are met; UK tax on a later sale depends on her residence then. These figures are invented for the arithmetic.
The Nigerian tax question
EMI is a UK tax regime. It does not decide how Nigeria taxes a Nigerian resident on an option. Nigeria's personal income tax changed under the Nigeria Tax Act 2025 from 1 January 2026, with employment income taxed in bands. Whether and when a gain on an option is employment income in Nigeria, and how the subsidiary should handle PAYE, are questions for a Nigerian tax adviser before you grant, not after. Agree also how the employee will pay the exercise price in pounds and hold UK shares from Nigeria.
If EMI does not fit
- Non-tax-advantaged options. Can be granted to employees and others, but without EMI's UK tax treatment.
- Contractor equity. HMRC's ERSM20210 explains that the employment-related securities rules apply where shares or options are available by reason of employment; the treatment of contractors needs advice.
- Cash-based schemes. Phantom shares or bonuses linked to the company's value, paid through payroll.
- Restructuring the hire. Moving key people onto a subsidiary's payroll may bring them within EMI.
For the wider equity conversation with remote hires, see equity for remote workers of a UK startup.
Where Pryme fits
When staff exercise options or receive cash awards, money moves between pounds and naira. A Pryme Business Account holds both, Swap shows the rate and fee before you approve, and payroll can pay naira awards alongside salary. See Business Swap.
Questions people ask
Can Nigerian employees get EMI options?
Yes, if they are employees of the UK company or a qualifying subsidiary and meet the working-time test of 25 hours a week or 75% of working time. Residence in Nigeria is not itself a bar.
Can I give EMI options to a contractor in Nigeria?
No. ITEPA Schedule 5 paragraph 25 requires the holder to be an employee of the company or a qualifying subsidiary. Contractors are not.
Can staff employed through an employer of record get EMI?
No. Their employer is the EOR, not your company or its subsidiary, so they fail the employment test.
How much can one employee hold in EMI options?
GOV.UK says up to £250,000 in a three-year period, valued at grant.
Sources
- GOV.UK: Tax and Employee Share Schemes, Enterprise Management Incentives (updated 30 Sep 2026) · accessed Oct 2026
- legislation.gov.uk: ITEPA 2003 Schedule 5 paragraph 25, the employment requirement · accessed Oct 2026
- legislation.gov.uk: ITEPA 2003 Schedule 5 paragraph 26, commitment of working time · accessed Oct 2026
- HMRC Employment Related Securities Manual ERSM20210 (updated 5 May 2026) · accessed Oct 2026
- Mondaq (Adeola Oyinlade & Co): Personal income tax under the Nigeria Tax Act 2025 (5 Jan 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.