Introduced in order to reduce regulatory burdens on businesses and increase the choices available to employees, Employee Shareholder Status (ESS) was launched on 1 September 2013. It allowed companies to give shares worth more than £2,000 to staff and as long as that value was less than £50,000 there would be no CGT on a future disposal of those shares.However, Osborne has recently announced new rules that will see shares issued on or after 17 March 2016 have a lifetime cap of £100,000 on any gains made. This, according to Jemima Jones, tax director at Wilkins Kennedy, is due to the increased popularity of ESS among companies that have gone through a buyout and would like to gift shares to certain employees.
“This CGT cap”, she said, “makes the ESS far less attractive than it currently is and we can expect to see a reduction in the number of new schemes being implemented. There is a further sting in the tail for entrepreneurs hoping to use ESS to incentivise employees. Introduced in the last Parliament, it requires employees to give up some of their employment rights in return for shares in their employer, attracting a zero per cent capital gains tax on disposal. Individuals who acquire shares as employee shareholders will be subject to a lifetime cap of £100,000 on gains benefiting from zero per cent CGT.”
Read more on the Budget 2016:
- Chancellor takes more high earners out of top tax bracket
- Are you one of 6,000 small firms set to pay no rates?
- George Osborne to cut corporation tax to 17 per cent
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