Tax treatment of employee shareholder shares

On 28th March 2013 the government published the Finance Bill 2013, part of which included details about the tax treatment of shares acquired in connection with the proposed new employee shareholder employment status.

The government has been consulting about, and promoting legislation for, a proposed new  “employee shareholder” employment status since October last year and plans to introduce the new employment status with effect from 1st September 2013.

Employee shareholders will lack certain employee protections and rights. Each will receive shares (worth at least £2,000) in consideration of becoming an employee shareholder, and will enjoy a capital gains tax (CGT) exemption on disposals of such shares (worth up to £50,000 when acquired).

The relevant income tax and National Insurance contributions (NICs) legislation will be amended to deem, for tax and NICs purposes, that an employee shareholder pays £2,000 for their employee shareholder shares. These changes will eliminate income tax liabilities on acquisition for employee shareholders receiving the minimum value of employee shareholder shares but are also likely to result in there being an income tax liability for employee shareholders who acquire shares worth more than £2,000.

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