Employee Shareholder Scheme Launched

High-growth companies or those experiencing financial difficulty are on the list of beneficiaries for the Employment Shareholder employment status, which came into effect 1st September. Baker Tilly suggests that offering employees shares in a tax-efficient manner will incentivise them, and benefit businesses unable to enter into the Enterprise Management Incentive or those with over 250 employees.

Employees of companies involved in the scheme will be offered shares in the business in exchange for giving up such employment rights, in specified circumstances, as unfair dismissal, flexible working arrangements and statutory redundancy payments.

Benefits to employees include up to £2,000 worth of tax-free shares, with a possible £48,000 being awarded subject to income tax and National Insurance.

Andy Capes, Baker Tilly’s head of food and drink in the north region said, “The scheme allows food and drink businesses greater flexibility to manage their workforces. It also provides a means for companies with limited cash resources to incentivise their employees now, without the need for a large cash outlay. This characteristic is helpful if the firm wants to make investments, for example in new technology. There could potentially be great upside potential for employees participating in the scheme. Shares awarded now will likely be at low valuations and so have scope for substantial tax-free capital gains as the recovery continues. That said, there will likely be reluctance among employees to relinquish some of their employment rights in exchange for tax-advantaged shares and clearly the level of willingness to do this will depend on the total value of the shares on offer at the time of issue. The scheme has interesting features, both for both the employer and employee, that could be attractive to certain transport businesses, but it will be interesting to monitor the take up of the scheme in the sector going forwards.”

For further information, visit www.hmrc.gov.uk/employeeshareholder