The Employee Share Ownership Centre
A new type of employment contract guaranteeing no CGT on shares given to employee owners in exchange for some of their standard UK employment rights has been announced by the Department of Business, Innovation and Skills.
Under the new 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 some of their employment rights, such as unfair dismissal, redundancy, and the right to request flexible working and training. Companies will still have the option to grant more generous working conditions if they want to.
The contract is expected to prove especially popular among fast-growing SMEs, which are most burdened by the weight of red tape.
The announcement of this measure which gives a further boost to employee ownership has enjoyed a positive reaction on the whole.
The Chancellor of the Exchequer, Mr George Osborne, quoted Marx while announcing the new type of employment contract in his speech at the Conservative conference on October 8:
It’s a voluntary three way deal.
You the company: give your employees shares in the business.
You the employee: replace your old rights of unfair dismissal and redundancy with new rights of ownership.
And what will the Government do?
We’ll charge no capital gains tax at all on the profit you make on your shares.
Zero percent capital gains tax for these new employee-owners.
Get shares and become owners of the company you work for.
Owners, workers, and the taxman, all in it together.
Workers of the world unite.
ESOP Centre Chairman Malcolm Hurlston stated:
It is good to see new thinking on employee ownership. Where employees can freely choose more risk in return for the chance of a tax-free capital reward, there is little to quarrel with. For the rest we look forward to examining the proposition in detail.
The government will consult on further details of the new contract later this month. The ESOP Centre encourages feedback from members on the issue, please get in touch with David Poole to discuss.
One Response to Osborne announces CGT break for new employee owners
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Surprised that you think there’s ‘little to quarrel with’. These new employee-owners will have tiny minority stakes in companies and so virtually no real power as shareholders whilst at the same time giving up very real and very important employee rights. For example, a company that gives just £2000 of shares to its employees can then fire them at will on otherwise illegal grounds like gender, pregnancy etc. This is an awful mechanism to encourage the selling out of rights.
What the government really needs to do is make it highly attractive to entrepreneurs to choose cooperative models for new startups and to make all-employee buyouts much easier and tax incentivised so employees get ownership AND full rights and power.