24 finance
Welcome developments for employee share plans
The latest draft Finance Bill clauses contain very good news for people who are participating in, or want to take up, Enterprise Management Incentive (EMI) share option plans, writes Grant Thornton‘s Matthew Courtiour. The changes announced mean that where employees sell shares they get through an EMI plan they could get entrepreneurs‘ relief. This means that they may qualify for a rate of capital gains tax of just 10% on their first £10 million of EMI gains – which will encompass the vast majority of EMI option gains, making the HM Revenue & Customs (HMRC) supported tax-efficient plan even more attractive
In order to qualify the proposed rules include a few key conditions, such as:
• The options or shares must have been held for a combined period of at least 12 months prior to the date of sale
• The sale must take place after April 5, 2013, to be eligible.
We very much welcome the proposed changes to the EMI rules, which will encourage employee share ownership, particularly in entrepreneurial companies. However, it also means that company owners can still design the plan so that no shares change hands until an exit event, while the employees can still benefit from the lower tax rate.
The overall aim is to allow employees to benefit from the growth in value of the business where they have worked so hard to succeed. The tax relief now supports the commercial drivers that lead companies to implement EMI plans – something we at Grant Thornton lobbied hard
for and we are very pleased that the Treasury has listened.
At the time of going to press, the legislation was due to be issued in its final form at the end of March.
The key, of course, is getting the details right and so you should always consult with an experienced EMI practitioner.
Employee shareholder shares
The Government has also introduced proposals for a completely new employee share plan designed to encourage further employee share ownership. This new plan will allow employees to receive shares in the employing company in an extremely tax efficient manner in exchange for giving up certain employment rights.
Employee representative bodies and some larger employers have expressed concern regarding the plan and because of the
restricted employment protection, it is not likely to be attractive to all employees.
However, some will welcome the proposed new rules. Shares received within the plan can be sold completely free of tax, subject to an upper limit of £50,000 worth of shares, and the Government is considering giving tax breaks on the initial acquisition of the shares too. Therefore, smaller businesses where cash can be tight may be able to use the new rules as a great way of attracting and incentivising key new employees to help them through the difficult economic climate and to drive growth going forwards. As with the EMI share changes, the rules are still draft at the time of writing, with final legislation due to have been passed by the end of March.
Details: Matthew Courtiour Equity reward manager 07969-327960
matthew.courtiour@
uk.gt.com
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grant-thornton.co.uk www.businessmag.co.uk THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – APRIL 2013
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