Employee shareholder status

By Tolley in association with Sarah Bradford
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The following Employment Tax guidance note by Tolley in association with Sarah Bradford provides comprehensive and up to date tax information covering:

  • Employee shareholder status
  • Important note
  • Background
  • Conditions
  • Making an employee shareholder agreement
  • Shares that can be used
  • Employee rights covered by the agreement
  • Key points for employers

Important note

In the Autumn Statement given on 23 November 2016, the Chancellor announced that the tax advantages associated with employee shareholder shares are being withdrawn for shares given under agreements entered into on or after 1 December 2016 (2 December 2016 in cases where the potential employee shareholder receives professional advice in relation to the share offer on Autumn Statement day before 1.30pm). See the Autumn Statement , para 4.31.

The legislation on employee shareholder status itself will be repealed in due course.

Background

In a move intended to improve flexibility in the labour market, in 2013 the government created a new category of employment status, that of ‘employee shareholder’.

An employee shareholder is someone who works under an employee shareholder contract. A person may take on a role as an employee shareholder from the outset or an existing employee may choose to become an employee shareholder. An employee shareholder receives shares in the employer company (or its parent company) but in return loses some of the employment rights available to employees.

The rules on employee shareholder status came into effect on 1 September 2013.

This guidance note explains the procedure for making an employee shareholder agreement and the employment rights that are varied as a result of that agreement. For details of the tax treatment of shares issued under an employee shareholder agreement, see the Employee shareholder shares guidance note.

Conditions

The following six conditions must all be met for someone to become an employee shareholder:

  • both the company and the worker must agree that the individual will be an employee shareholder
  • the employer company must give the individual fully paid up shares in the company (or its parent

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