Employee shareholder shares

Produced by Tolley in association with Ken Moody

The following Employment Tax guidance note Produced by Tolley in association with Ken Moody provides comprehensive and up to date tax information covering:

  • Employee shareholder shares
  • Important note
  • Background
  • Tax exemption for advice provided
  • Employee shareholder shares
  • Shares that can be used
  • Share valuation
  • Income tax and NIC treatment of shares
  • Income tax and NIC treatment of shares ― reporting requirements
  • CGT
  • More...

Employee shareholder shares

Important note

In the Autumn Statement given on 23 November 2016, the Chancellor announced that the tax advantages associated with employee shareholder shares were being withdrawn for shares given under agreements entered into on or after 1 December 2016 (2 December 2016 in cases where the potential employee shareholder (ES) receives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The legislation on ES status itself will be repealed in due course.


In a move intended to improve flexibility in the labour market, in 2013 the Government created a new form of employment status and labelled it as ‘an employee shareholder’. Companies were able to offer this new status to selected employees or prospective employees between 1 September 2013 and 1 December 2016.

An ES is an employee who has, by agreement with his employer, given up and amended certain employment rights in exchange for shares in his employer’s company or in its parent company. Those shares must be awarded to the employee free of charge. No consideration may be given for employee shareholder shares beyond the individual’s agreement to the reduction in his employment rights. For more details, see the Employee shareholder status guidance note.

In order to achieve ES status, six conditions must all be met:

  1. the individual and the company must both agree that the individual will become an ES

  2. shares in the employing company or its parent company with a market value of at least £2,000 must be issued or allotted fully paid to the individual

  3. the individual must not pay for the shares in any way ― entering into the agreement to become an ES is the only consideration allowed

  4. the employer must provide the individual with a written statement of the particulars of the status of an ES

  5. professional advice must be provided by a relevant independent adviser to the individual concerning the terms and effect of the written statement.

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