Next Finance Bill to provide for existing EMI schemes and CSOPs to be amended to provide for PISCES trading (without losing the tax reliefs)

The PISCES framework introduces regulated, intermittent trading windows during which qualifying private companies can allow shareholders to offer their shares for sale on a PISCES platform to a restricted group of investors.  Companies can set their own terms on pricing, disclosures, and who can participate, allowing them to retain control while also providing liquidity.

Essentially, the UK government is trying to open up private company shareholder liquidity.  The launch of the PISCES sandbox by Rachel Reeves is a major project, the rules for which were discussed in detail by HLaw HERE.

By including employees as qualifying PISCES investors, it is clear that the government is determined to allow the employed workforce to realise value earlier from sales of unquoted shares.  Historically in the UK, most share option plans in private companies have been ‘exit-only’, meaning the options are only exercised on the IPO or the sale of the company, and there were limited (if any) opportunities to exercise your option beforehand.  Employers saw this as a win-win – employees worked harder for a potential capital event, and the business moved closer to a successful exit.

However, attitudes may be shifting, perhaps a reflection of the increased difficulty in successfully executing an IPO and mounting pressure from employees to provide alternative routes to liquidity.  This is where PISCES will step in, offering employees a wider market in which to trade its shares.  This is great for those employees with actual shares, but what about those with options?

For approved discretionary share option plans, i.e. Enterprise Management Incentive schemes (“EMIs”) and Company Share Option Plans (“CSOPs”), there is an obvious issue for PISCES trading in that their existing rules do not reference a sale on a PISCES platform as one of the exercise events.  Current HMRC thinking on amendments to the rules could have resulted in any amendment to allow the exercise on admission to PISCES being a disqualifying event and there would be adverse income tax and NICs consequences. Effectively, under the current rules, if the existing EMI or CSOP agreement was amended to allow for trading on PISCES, this could cause the option to be treated as surrendered and re-granted, thus forfeiting any tax relief.

To safeguard the tax benefits of these discretionary option plans that employees have counted on, the government have confirmed that the next Finance Bill will allow the rules of these option schemes to be amended with retrospective effect.  Specifically, the new legislation will permit existing discretionary approved option schemes to be amended to allow admission to trading on PISCES to be an exercise trigger without sacrificing the current tax advantages these option schemes provide.

Any amendment will of course require the relevant employees’ consent, but the incentive here is to allow said employees to exercise their options on PISCES platforms while continuing to benefit from  the tax advantages they initially sought.  The government have stated that provided the conditions of the scheme and contract are met, employees who exercise options to acquire shares on PISCES will pay no extra income tax or national insurance contributions upon exercise of the options (unless the agreed exercise price is less than the market value of the shares on the date the option was granted).

While the specific legislation is to follow, it is understood that HMRC will use its collection and management powers not to collect tax on exercise of existing CSOP and EMI options if this is done following an amendment to allow exercise on admission to PISCES. The rules will also allow a PISCES admission to constitute an exercise trigger going forward in new EMI and CSOP schemes. This is all very helpful from a tax perspective, especially when coupled with the stamp duty and stamp duty reserve tax exemptions (as discussed HERE).

However, commercially, one needs to consider whether it is a good idea to allow exercise on admission to PISCES since allowing employees to liquidate at this early stage removes some of the incentive and retention aspects of share plans.

In any case, the government emphasises that companies should not alter their EMI or CSOP schemes or contracts prior to the enactment of new legislation on this front, as any change to a ‘fundamental’ term (such as the exercise trigger) would continue to fall under the current rules and may jeopardise eligibility for the associated tax reliefs.

Instead, companies and employees should await the formal HMRC guidance which is due to be published at the end of July 2025.  In the meantime, the astute employers will begin preparing internally – reviewing scheme documentation, governance processes, employee communications and so on – to gain a first mover advantage once the Finance Bill is in force.  The HLaw team are on hand to provide advice and assistance with amending your share option schemes,  ensuring they allow for PISCES trading whilst also protecting your tax position.  More broadly, we can ensure you are well-positioned to take advantage of the new flexibility and increased liquidity that PISCES will offer once the legal framework is firmly in place.

This Insight piece was written by Jeremy Glover and Alina Merchant-Mohamed, with limited input from Henry Humphreys.  If you have questions about PISCES and secondary share sales generally, do please reach out to the team.

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