Budget 2013: Following on from the introduction of a new employee ownership status in October 2012, Chancellor George Osborne has announced in the Budget 2013 that the first £2,000 of share value that any employee receives under the new status will be free from income tax and national insurance (NI) contributions.
This will take effect from 1 September 2013, when the new status comes into effect.
Mark Groom, tax partner at Deloitte, said: “This is clearly welcome news. However, the scheme is not without complexity.
“If an unquoted organisation wants to keep to the minimum value of shares, given that HMRC will currently only agree share values post transaction, how will it determine the correct number of shares to provide?
“If it underestimates the value, the shares won’t qualify for the new relief. If it over-estimates the value, it will have given too much away.
“There are also concerns that the new scheme could end up being used to deliver significant tax-free growth to certain key employees, rather than achieving the government’s main objective of increasing flexibility and reducing the regulatory burden on business.
“On the whole this is good news but this remains a complex policy to implement.”
Despite this welcome tax relief, the employee shareholder contracts face further technical difficulties which may prevent its use in the real world.
We encourage officials to consult with the share plans industry to ensure this does not become a white elephant policy.