Employee shareholder shares—shares for rights [Archived]
Produced in partnership with William Franklin and Stephen Woodhouse of Pett Franklin
Employee shareholder shares—shares for rights [Archived]

The following Share Incentives guidance note Produced in partnership with William Franklin and Stephen Woodhouse of Pett Franklin provides comprehensive and up to date legal information covering:

  • Employee shareholder shares—shares for rights [Archived]
  • What are employee shareholder shares?
  • Requirements for a legally binding employee shareholder agreement
  • Tax treatment
  • Income Tax relief
  • Shareholder with a Material Interest
  • National Insurance Contributions
  • Capital Gains Tax
  • Valuation
  • Employment law rights
  • more

Archived: The ability to offer tax-favoured employee shareholder shares or ESS (commonly used in private equity company arrangements) has been removed. The government announced in the Autumn Statement 2016, the removal of the following reliefs in relation to ESS shares:

  1. the income tax and NICs relief which applies to the first £2,000 worth of employee shareholder shares received by an individual

  2. the capital gains tax exemption in respect of all or a portion of the ESS shares, and

  3. the provision which ensures that, when a company buys employee shareholder shares back from an employee shareholder, the consideration is not a distribution in the shareholder’s hands

The removal of the reliefs applies to any employer shareholder agreements made on or after 1 December 2016. However, any individual who received independent advice regarding entering into an employer shareholder agreement before 23 November 2016 still had the opportunity to enter into the agreement before 1 December 2016 and still receive the beneficial income and CGT tax advantages. Similarly, any individual who received independent advice on 23 November 2016 before 1.30 pm still had the opportunity to receive the tax advantages provided they enter into the Employee Shareholder agreement on or before 1 December 2016.

The removal of relief does not affect ESS agreements entered into prior to the above dates.