The government has recently announced that as of the 1st December 2016, the income tax and capital gains tax reliefs associated with employee shareholder status (ESS) are abolished. Obtaining ESS had been a way for companies to gift shares to its employees without the employee incurring an income tax charge in exchange for the employee waiving certain employment rights. However, the government has stated that there is evidence that ESS had been used for tax planning and the abolition of the tax reliefs is in response to this evidence.
Although this announcement may appear surprising, the restriction of the CGT relief available for ESS shares earlier this year indicated the direction that the government might take in future over ESS. Nevertheless, for those employees and companies who entered into ESS arrangements before the 1st December 2016, the tax advantages will continue to apply. For small companies looking for a tax efficient way to transfer shares to employees going forward, the main scheme left is the enterprise management incentive scheme (EMI). Under EMI, employees are granted share options that can provide a number of tax benefits to both the company and the employees. However, for the company and the employee to be eligible for the scheme there are a range of tests that need to be met.
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At Waterfront, our specialist employment & HR lawyers advise on settlement agreements every week but for our employee clients, signing such an agreement can be a once-in-a-lifetime event. If you have been offered a settlement agreement or you are finding the process confusing or daunting, we are here to help. What…
In times of economic turmoil, redundancies are seldom far away. Against the backdrop of the cost-of-living crisis, unease in the financial markets resulting from political uncertainty and the continuing legacy of the Covid-19 pandemic, many companies are making cutbacks and having to find efficiencies in order to survive. Indeed, the last few weeks have seen news headlines about mass-layoffs at Twitter, the Independent and Royal Mail.