Finance Bill 2026: when should you amend your share option scheme for PISCES?

The Private Intermittent Securities and Capital Exchange System (“PISCES”) sandbox launched on 10 June 2025.  It has been designed as a supervised space in which to build and operate regulated secondary markets for shares in mid to late stage private companies.  The first PISCES platform will launch later this year, to be operated by the London Stock Exchange.

PISCES and share schemes

However, those who already hold Enterprise Management Incentive (“EMI”) options or options under Company Share Option Plans (“CSOPs”) will not automatically be able to participate in PISCES trading.

What’s the concern with EMI and CSOP schemes?

EMI schemes and CSOPs are tax-advantaged share option plans for eligible employees of eligible companies.  They often form a critical part of incentive and retention strategies for UK growth stage businesses.

Under EMI scheme and CSOP rules, employees are typically allowed to exercise their options (i.e. acquire the shares under option) on exit only (e.g., on the sale or IPO of the company).  Schemes can be drafted so as to allow for an earlier exercise, but the vast majority of venture-capital-backed UK companies have exit only schemes.  Exit only schemes that are already in place will by definition not refer to PISCES trading windows as trigger events for exercise.

Plans can be amended to allow for PISCES-related exercise events but doing so is likely to be considered by HMRC to be a fundamental change to the terms of the option and as such, a surrender and re-grant of that option at today’s valuation. Effectively, the option is treated as if the old one was cancelled and a new option was granted at today’s market value. The resulting tax consequences can be eye-watering, particularly if there has been a substantial uptick in the company’s valuation between the original date of grant and the date of deemed surrender and re-grant.

Further still, if the new grant value (determined by that new valuation) exceeds EMI scheme or CSOP limits, then the option would be treated as an unapproved option and lose its tax advantaged status altogether. For example, an individual cannot hold unexercised CSOP options that have a total market value of more than £60,000, as any excess would disqualify the entire holding of options.  A surrender and re-grant may cause the limit to be inadvertently exceeded.  The limit is considerably higher for EMI options – £250,000 – but the principle and risk are the same.

The variation of options following grant is particularly limited for CSOP option holders, as legislation[1] mandates that certain key terms (such as the exercise price, the number and description of the shares and the times at which the option may be exercised) must be set at the date of grant in order for the option to qualify as a CSOP option.  If these terms are subsequently varied in a manner that is not permitted by the CSOP scheme rules, or is more than a simple adjustment to reflect variations in the Company’s share capital, then the option may cease to qualify as a CSOP option and thereby lose all associated tax advantages.

The Finance Bill 2026

To allow for existing holders of EMI and CSOP options to participate in PISCES, the UK government has proposed the Finance Bill 2026 (the “Bill”).  The latest draft of the Bill was published on 21 July 2025.  Alongside publication of the Bill, the government launched a technical consultation which ran until 15 September 2025, and it is now considering the feedback received.

The latest draft of the Bill includes provisions that allow companies to amend their EMI and CSOP arrangements so that PISCES trading windows can be added as triggers for exercise without jeopardising the tax treatment of the options granted under them.

Conditions to satisfy to amend the scheme

Unsurprisingly, the Bill imposes strict conditions on how and when the amendments can be made:

• the sole effect of the amendment must be to allow for exercise only where the shares to be issued become “PISCES shares” (as defined in the Regulations), and only if those shares are then immediately traded on a PISCES platform;
• the amendment must take effect on or after 15 May 2025 – amendments made before this date will not qualify as they will not have referenced “PISCES shares“;[2]
• the share option in question must have been granted before the Bill receives Royal Assent (expected to be in spring 2026) – the policy intention here is to support existing schemes during the transition, the Bill will not assist with the amendment of scheme rules for options granted after Royal Assent; and
• the amendment must be made in writing, either as a written agreement with the individual option holder or via written notice served upon them by the company.

If any of these conditions are not met, HMRC is likely to consider the amendment to be a fundamental change to the EMI scheme or CSOP in question and the sought after tax-advantages may then be lost as a result of the deemed surrender and re-grant.

New schemes as an exercise event

Companies who adopt new share schemes after the Bill receives Royal Assent ought prudently to include PISCES provisions in the rules if PISCES trading might one day be a possibility. If the plan does not include PISCES windows as exercise events, it would not meet the criteria set out above and would therefore not be eligible for amendment in accordance with the Bill.  If the plan is then amended anyway, that same risk from surrender and re-grant would apply but the company is not able to rely on the provision in the Bill.  Share scheme incentive practitioners will be updating their precedents.

Existing and historic schemes

For those companies seeking to amend their existing share schemes therefore, those timings above are of paramount importance.  It must be clear to the parties involved, HMRC, and to any future investors conducting due diligence on those schemes amended now that all those conditions above were satisfied.

HMRC’s vote of confidence

The Bill remains in draft form, and there is no certainty that it will become law, although a row back by the government would seem unlikely at this point.  HMRC has updated its technical guidance (the “Guidance”) to provide further clarity and confirm that an amendment made in line with the Bill will not be treated as a surrender and re-grant, so long as it satisfied the criteria above.  The Guidance confirms that the amendment cannot be a vague or broad provision that allows exercise on any secondary market or other liquidity event – PISCES must be expressly named as an exercise event.

HMRC’s decision to publish guidance before the Bill takes effect sends a strong signal that the PISCES provisions will eventually become law, but the guidance is not legally binding.

Readily convertible assets

The Guidance also states that an employee’s shares will be considered readily convertible assets (“RCAs”) if:

• arrangements exist for the shares to be traded on PISCES; or
• the shares are acquired with the intention of being traded on PISCES.

Regarding the first limb, an ‘arrangement’ could include an EMI scheme or CSOP that has legislated for a PISCES window to be an exercise event. It does not matter whether a PISCES window is open at the time the shares are acquired, or whether the employee ultimately sells some or all of their shares on a PISCES platform – the shares will still be considered RCAs.

However, if only a portion of the shares acquired on exercise is eligible for trading on PISCES, then only that portion will be treated as RCAs. Further, if shares were previously admitted to PISCES but are not tradable at the time of acquisition, and no other trading arrangements exist or are expected, those shares will not be treated as RCAs.

How do you prepare?

Notwithstanding the Guidance, companies ought prudently to hold off from amending their schemes for now.  If expectations of employees need to be managed, non-binding comfort letters can be produced to confirm that the amendments to allow for PISCES trading will go through once the Bill becomes law.

For now, companies should focus on reviewing their existing EMI schemes or CSOPs to identify where amendments may be needed once the Bill is enacted.  Those contemplating new share schemes and PISCES involvement should also ensure that PISCES windows are properly embedded within their documentation as triggers for exercise (if that is what is wanted).

If you would like advice on amending share schemes, or have additional questions about PISCES and secondary share sales generally, do please reach out to a member of the HLaw team.

This Insight piece was written by Alina Merchant-Mohamed, with input from Jeremy Glover and Henry Humphreys.

All the thoughts and commentary that HLaw publishes on this website, including those set out above, are subject to the terms and conditions of use of this website. None of the above constitutes legal advice and is not to be relied upon. Much of the above will no doubt fall out of date and conflict with future law and practice one day. None of the above should be relied upon. Always seek your own independent professional advice.

Humphreys Law

[1] See section 21A of Schedule 4 of the Income Tax (Earnings and Pensions) Act 2003.

[2] The announcement of the proposed exception to existing EMI and CSOP schemes was made by James Murray, the Exchequer Secretary to the Treasury, on 15 May 2025.