On September 1st 2013 a new scheme was introduced by the Finance Act 2013 Schedule 23. This is ‘Employee Shareholder Shares’.
This new piece of legislation concerns a new employee status, namely “employee shareholder”.
There is some debate over the value of this new employee status and whether it provides enough benefits to the employee to counteract some of the sacrifices to employee rights that it incurs.
The Growth and Infrastructure Act 2013 introduced this new term for employee status in employment law but it has also caused a required insert into both tax legislation and the Employment Rights Act 1996.
This is where some debate arises as the new legislation reflects an employee taking up a tax advantaged offer of shares in their company but in doing so they give up some important employment rights!
The main advantages for the employee, in entering into this new status, are an exemption from capital gains tax with some elements of income tax and NIC saving, however even though some will jump at the chance of tax free gain in the future tax advisors must be certain to enlighten them on the possible consequences of giving up important employment protections.
Some of the employment rights employees will have to sacrifice when gaining “employee shareholder” status are: the right to not be unfairly dismissed, surrender of redundancy pay and the right to request to undertake training to name but a few. It also affects notice you must give for returning to work following maternity, paternity or adoption leave.
Annette Morley reflects that “the advantages to both employer and employee (particularly the latter) seem limited when compared with the downside.”
In the September edition of the Practical Tax Newsletter 2013 you can find information on the new shareholder scheme and a helpful review on inheritance tax by our own Andrew Rainford.
Andrew recounts a situation regarding Inheritance Tax and Life Interest Fund. It highlights the importance of detail in a client’s will and in explaining inheritance law nuances properly to clients so their last wishes are reflected accurately.
The consequences of a Life Interest Fund had not been fully explained to the clients by their solicitor and they had only focused on the fact it included exemptions from inheritance tax. Detail is essential in inheritance and you can find out Andrew’s solution to this situation that ensured the client’s wishes were fulfilled.
