Autumn Statement: Employee Shareholder Status………..R.I.P.
24th November 2016
Introduced by George Osborne in 2013, the ESS has not been overly popular with small business but has been useful in particular situations where employees could be “given” £2,000 worth of shares in their employer with no income tax payable, and have no capital gains tax to pay when they were sold, either back to the company or to a third party, possibly on exit. This tax benefit was allowed as long as the employee agreed to waive various statutory employee rights.
The low initial value and the CGT exemption made this scheme a useful tool for early start ups with prospects for good returns on exit. The CGT exemption had already started to be gnawed away by the Treasury, and now they have decided that it is not being used appropriately for its original policy objectives and have abolished it with (almost) immediate effect.
Companies will now have one less tax efficient tool with which to incentivise staff, but the Enterprise Management Incentive (EMI) scheme and Company Share Option Plans (CSOPs) are still available to be used with the blessing of the Treasury, and the EMI in particular is a simple and easy to understand method for providing staff with tax effective incentivisation.
The ESS had a short and not altogether successful life and its passing will go largely unnoticed, but it will be missed by those who have been able to apply its benefits to their circumstances.
If you would like to discuss this matter in more detail, please contact Peter Hedgethorne on 01273 701200 or firstname.lastname@example.org