EMI Valuation Before Granting Options: A Founder’s Checklist

A business valuation before granting EMI options should support an exercise price that is fair, evidence-based and ready for scrutiny. Starting early gives you time to resolve the valuation questions alongside hiring, without turning the option grant into a last-minute finance exercise.

The starting point is the specific shares, their rights and the company's position at the relevant date, rather than the headline value in your investment presentation. Your accounts, forecasts, cap table and proposed option terms need to tell a consistent story, with any differences explained. At Consult EFC, we help founders connect that evidence to a supported share value and a defined HMRC submission process, starting with the records and decisions needed before grant.

Business valuation before granting EMI options: what founders need to prepare

Define the share class, proposed grant timetable and valuation date before the analysis begins. These determine what is being valued and which evidence is relevant.

HMRC says companies should only approach Shares and Assets Valuation (SAV) when they're in a position to grant. Preparing early is sensible; requesting agreement while the scheme remains undecided creates avoidable pressure.

Gather the records that show how the business is performing

Provide recent statutory accounts, current management accounts, budgets, forecasts and cash runway analysis. Include fundraising documents, subscription agreements, term sheets and details of significant trading changes.

The figures need context. Explain missed budgets, customer concentration, revenue quality and changes in funding needs. For a SaaS business, ARR, churn and gross margin can help explain the commercial position behind the accounts.

Keep the evidence tied to the valuation date. Forecasts should show their preparation date and underlying assumptions, rather than presenting later achievements as facts already known.

Our EMI valuation preparation guidance provides further context on building a documented valuation file.

Set out the share rights, restrictions and cap table

Provide the articles of association, shareholder agreements, share-class rights, investor preferences, transfer restrictions, current cap table and relevant board papers. Identify outstanding options and instruments that could affect ownership or value allocation.

These documents establish the economic position of the shares under option. Dividend rights, voting rights and priority on a sale can affect what a buyer would pay.

A recent funding price is useful evidence, but it may concern shares with different rights. Explain the differences before drawing conclusions. The price should be assessed, rather than copied automatically.

Our guidance on share classes and EMI valuation explains why the legal terms matter.

How an EMI share valuation supports HMRC requirements

You can request advance agreement of the proposed share value from HMRC SAV using form VAL231. This is a voluntary service. A company can grant without an agreed valuation, although HMRC may later enquire into the value used. Use HMRC’s VAL231 form.

Where restrictions affect market value, the proposal considers Actual Market Value (AMV) and Unrestricted Market Value (UMV). AMV takes relevant restrictions into account. UMV assesses the shares without those restrictions.

The effect needs analysis. Neither minority ownership nor a transfer restriction justifies a predetermined discount. Each adjustment needs supporting evidence and a reasoned explanation.

Understand what HMRC agreement does and does not confirm

Agreement concerns the valuation submitted. It doesn't approve the entire EMI scheme or establish that every company, employee and option condition is satisfied.

Keep valuation work separate from eligibility assessments, grant documentation and reporting obligations. EMI advance assurance concerns qualifying conditions and is a different process from SAV valuation agreement.

That separation matters operationally. A valuation letter cannot replace signed option agreements, proper company approvals or timely notifications. Each part needs its own evidence and responsible person.

Our guide to EMI valuations gives wider context for how the share value fits into the scheme.

Plan around the 90-day agreement window

HMRC's 90-day validity period starts on the date of valuation agreement, not the VAL231 submission date. Record that date and organise the grant within the period. See HMRC’s valuation agreement rules.

If the window expires before grant, HMRC requires a fresh application using a newly completed VAL231.

The agreement also depends on there being no intervening change that might affect share value. A funding event, significant contract or changed trading position may therefore require further consideration before reliance.

The calendar is only one control. The commercial facts still need to support the agreed figure when the options are granted.

What a supported EMI valuation adds to the process

Professional support connects the financial evidence, share rights and valuation methodology in one documented analysis. It also identifies missing information before it becomes an unresolved submission question.

At Consult EFC, our HMRC share valuation services cover evidence-led valuation work, with submission support defined in the engagement.

Connect the company evidence to the proposed share value

A supported valuation explains the method selected, the assumptions used and the relevance of available transaction evidence. Where appropriate, it reconciles enterprise value to equity value after considering cash, debt and other claims.

The analysis then considers allocation across share classes and the value of the shares under option. AMV and UMV are assessed where needed, with adjustments explained rather than selected to reach a preferred exercise price.

The engagement should define whether preparing VAL231 materials and responding to HMRC questions are included. Report preparation and HMRC review are separate stages. HMRC controls its examination and outcome; neither agreement nor response timing is guaranteed.

Keep valuation and grant administration on track

Confirm that the final share class and grant documents match the valuation instruction. Retain the agreement letter, record its date and assess changes before grant.

Assign responsibility for both grant notification and annual employment-related securities (ERS) reporting. For grants made on or after 6 April 2024, notification is generally due by 6 July following the end of the tax year of grant. The annual ERS return is a separate obligation, also generally due by 6 July. Check HMRC’s grant notification guidance and annual ERS reporting requirements.

Keep the report, supporting records, approvals, signed agreements and HMRC correspondence together. A consistent file makes later investor and buyer questions easier to answer without reconstructing historic decisions.

Frequently Asked Questions

Can a pre-revenue company support an EMI valuation?

Yes. A company without revenue can still provide evidence about its cash, funding, product development, commercial progress and financial forecasts. The method must suit its circumstances, and assumptions need documentation. Pre-revenue status doesn't establish that the shares have nominal value.

Does the valuation determine what employees must pay?

The valuation supports the exercise-price decision, but the company sets that price in the option agreement. An option may be granted below market value, although that can create an income tax charge on exercise. The valuation figure and contractual exercise price are distinct. HMRC explains the tax charge on discounted EMI options.

Can we reuse a valuation prepared for a business sale?

It may contain useful evidence, but its purpose and subject may differ. A sale valuation can concern the whole business and control, whilst EMI work concerns the proposed option shares. The earlier analysis needs to be assessed against the relevant date, rights and valuation purpose.

Must employees pay for shares when options are granted?

An option is a right to acquire shares later under its terms. Granting an option doesn't itself make the employee a shareholder or require payment of the share exercise price at that point. The agreement governs when and how the option can be exercised.

Why retain the valuation file after the grant?

Investors and buyers may review historic option grants during due diligence. The supporting file shows what was valued, which evidence was available and how the conclusions were reached. It also provides context for the board's decisions and any later HMRC questions.

Is an annual ERS return needed without new grants?

Generally, a registered scheme requires an annual return until it has been formally closed. That can mean submitting a nil return when there are no reportable events. The absence of new grants doesn't by itself end the reporting obligation or close the scheme.

Prepare the evidence before committing to the grant

A supportable option price starts with reliable financial information, clearly documented share rights and a grant timetable that reflects the work still required. Put the valuation into your hiring and finance plans early, with responsibility assigned for the decisions and records that sit alongside it.

Keep valuation, eligibility and reporting distinct so that progress on one part of the process doesn't leave another unfinished. A well-supported value helps you explain the award to employees and answer future investor questions with a consistent record.

Consult EFC can support the analysis and agreed submission work, but HMRC retains control of its review. No adviser can promise valuation agreement or approval of the whole scheme.

Related reading: Business Valuation Reports: What Makes Them Credible?.

General information as at 29 October 2026. Obtain advice on the specific company, share rights and tax event.