No capital gains tax on employee share ownership for new employee-owners
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08 October 2012 - HM Treasury
The Chancellor of the Exchequer, the Right Honourable George Osborne
MP, has today announced plans for a new kind of employment contract
called an owner-employee.
New employee-owners will exchange some of their UK employment rights
for rights of ownership in the form of shares in the business they work
for, any gains on which will be exempt from capital gains tax.
Companies of any size will be able to use this new kind of contract,
but it is principally intended for fast growing small and medium sized
companies that want to create a flexible workforce.
Under the new type of contract, employees will be given between £2,000
and £50,000 of shares that are exempt from capital gains tax. In
exchange, they will give up their UK rights on unfair dismissal,
redundancy, and the right to request flexible working and time off for
training, and will be required provide 16 weeks’ notice of a firm date
of return from maternity leave, instead of the usual 8.
Employee-owner status will be optional for existing employees, but both
established companies and new start-ups can choose to offer only this
new type of contract for new hires. Companies recruiting
employee-owners will continue to have the option of inserting more
generous employment conditions into the employment contract if they
Legislation to bring in the new employee-owner contract will come later
this year so that companies can use the new type of contract from April
2013. The Government will consult on some details of the contract later
this month.. Employee-owners receiving full capital gains tax relief on
the shares awarded as part of their contract will still be eligible for
existing employee share ownership schemes such as the Enterprise
1. Employee-owners receiving full capital
relief on the shares awarded as part of their contract will still be
eligible for existing employee share ownership schemes such as the
Enterprise Management Incentive.
2. The Government consultation on the employee-owner contract
include the details of restrictions on forfeiture provisions to ensure
that if an employee-owner leaves or is dismissed, the company is not
able simply to take the shares back but is able to buy them back at a
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Article Published/Sorted/Amended on Scopulus 2012-10-09 10:05:25 in Employee Articles