Letter of advice to an individual on the implications of becoming an employee shareholder [Archived]
Letter of advice to an individual on the implications of becoming an employee shareholder [Archived]

The following Share Incentives guidance note provides comprehensive and up to date legal information covering:

  • Letter of advice to an individual on the implications of becoming an employee shareholder [Archived]
  • Implications of becoming an employee shareholder
  • What is an employee shareholder?
  • What are the requirements that must be met before you can be an employee shareholder?
  • What employment rights do I give up if I become an employee shareholder?
  • What are the tax implications of becoming an employee shareholder?
  • What is the income tax position on acquisition?
  • What is the income tax position on vesting/sale?
  • Will I be liable to capital gains tax?
  • This advice constitutes independent legal advice
  • more

Produced in partnership with Jeremy Glover of Reed Smith

Archived: This Precedent is for illustrative purposes only as it reflects the position up to 1 December 2016. The ability to offer tax-favoured employee shareholder shares or ESS (commonly used in private equity company arrangements) has now 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 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