Owner – employee status announced in UK – with no Capital Gains tax ! - Succession Plus

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Owner – employee status announced in UK – with no Capital Gains tax !

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Owner – employee status announced in UK – with no Capital Gains tax !

By , October 12, 2012

The UK Chancellor of the Exchequer, George Osborne, has announced plans for a new kind of employment contract called an owner-employee.

New employee-owners will exchange some of their UK employment rights for ownership in the business they work in, any gains on which will be exempt from capital gains tax. The exemption is available to arrangements under all types of companies, including start-ups.

Under the new type of contract, employees will be given between £2,000 and £50,000 of shares that are exempt from capital gains tax. In exchange, they will give up their UK rights on unfair dismissal, redundancy, and the right to request flexible working and time off for training, and will be required provide 16 weeks’ notice of a firm date of return from maternity leave, instead of the usual 8.

Employee-owner status will be optional for existing employees, but both established companies and new start-ups can choose to offer only this new type of contract for new hires. Companies recruiting employee-owners will continue to have the option of inserting more generous employment conditions into the employment contract if they want to.

Legislation to bring in the new employee-owner contract will come later this year so that companies can use the new type of contract from April 2013. The Government will consult on some details of the contract later this month.. Employee-owners receiving full capital gains tax relief on the shares awarded as part of their contract will still be eligible for existing employee share ownership schemes such as the Enterprise Management Incentive.

George Osborne said of the scheme, in his speech at the party conference:

“This idea is particularly suited to new businesses starting up; and small and medium sized firms. It’s a voluntary three way deal. You the company: give your employees shares in the business. You the employee: replace your old rights of unfair dismissal and redundancy with new rights of ownership.”

“And what will the Government do? We’ll charge no capital gains tax at all on the profit you make on your shares. Zero percent capital gains tax for these new employee-owners. Get shares and become owners of the company you work for. Owners, workers, and the taxman, all in it together.”

Craig West

Craig West

Managing Director | Succession Plus

Craig West is a strategic accountant who has over 20 years’ experience advising business owners. His background as a CPA in public practice, provided invaluable experience in the key issues of concern to business owners. Following 6 years of study to gain two masters degrees, Craig focused on Capital Gains Tax (CGT) for business sales advising on strategic management of tax issues. This experience formed a very strong view that business owners (and often their advisers) were unprepared and unaware of the steps required to prepare a business for exit.

Craig now acts as a strategic mentor for mid-market business owners and has written four critically acclaimed books on employee incentives, succession planning, asset protection and exit strategies. Craig has conducted numerous seminars and keynote presentations throughout Australia & internationally, including adviser education programs for the Institute of Chartered Accountants and CPA Australia.