Tax support for employee owners

Autumn Statement 2012: The government is considering options to reduce income tax and national insurance contributions (NICs) that arise when employee shareholders receive shares from their employer.

The options include deeming that the first £2,000 of shares received under the employee-shareholder status would be free from income tax and NICs.

As previously announced, the government will exempt gains on up to £50,000 of shares acquired by employee shareholders from capital gains tax (CGT) from 6 April 2013.

The government issued its response to a consultation into the employee-owner scheme, which will now be called employee-shareholder scheme, on 3 December.

The scheme, which was initially announced by Chancellor George Osborne on 8 October, would require employees to give up employment rights, such as wrongful dismissal, the right to redundancy pay and the right to ask for flexible working, to receive between £2,000 and £50,000 worth of shares in the company they work for.

In the Autumn Statement, it was confirmed that the Treasury and HM Revenue and Customs (HMRC) will support the Department for Business, Innovation and Skills (Bis) and the Cabinet Office in implementing the government’s response to the Nuttall review of employee ownership by contributing to a new implementation group, and the development of employee-ownership templates and toolkits.

It will also work with Bis, John Lewis Partnership and Santander to develop a forum to promote better access to finance for the sector.

Further financial incentives are being considered and will be announced in the 2013 Budget.

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Graeme Nuttall, partner at law firm Field Fisher Waterhouse and author of the Nuttall review, said: “It is great to see that the Treasury has today recognised the importance of the employee-ownership business model and has promised further work to promote it. 

“It is for all in the employee-ownership sector, and other more recent supporters in the wider business community, to get behind this dynamic agenda and make this the decade in which employee ownership enters the mainstream of the UK economy.”