The employee shareholder status (ESS) was introduced in 2013 as an initiative to aid the growth of small businesses and create within them a more flexible, motivated workforce. Under this arrangement a company was able to issue new shares to their staff in return for giving up certain employment rights. The tax benefits of this arrangement have been considerable. When first introduced, the employee was able to enjoy a complete exemption from tax when these shares were sold. Whilst subsequent changes in legislation reduced this tax advantage, the schemes nevertheless remained attractive.
Because of the tax advantage the government is clearly concerned the scheme is not achieving its stated aims and has decided the time is right to withdraw from the scheme altogether.
Employees wishing to introduce share incentives to employees should consider alternative tax-advantaged arrangements such as Enterprise Management Incentives (EMI) and Company Share Option Plans (CSOP). Contact Bill Longe for more information.