In 2012, as part of the overall push for simplification, HMRC introduced the concept of the ‘employee shareholder’. There were two announcements in the Budget regarding the treatment of gains arising from the disposal of such shares.
Participants will be pleased to hear that any capital gains on the disposal of up to £50,000 of shares acquired by an employee shareholder under their employee shareholder agreement will be exempt from tax. This will even be the case where the employer company buys in the employees shares. Existing share pooling and identification rules will be amended as necessary.
Finance Bill 2013 will also include provisions to reduce the income tax due when employee shareholders acquire shares under their employee shareholder agreement, by treating them as if they had paid £2,000 for these shares. Where appropriate, businesses will then be able to claim relief against the acquisition of shares by employee shareholders.
National insurance is also covered off - when an employee shareholder acquires shares, the same amount will count as earnings for Class 1 NICs purposes as counts as employment income for income tax purposes and the first £2,000 of the value of the shares will be NICs free.