BIS has today published its response to the consultation which it launched on 18 October 2012 on its proposed new “employee owner status”, under which employees would sacrifice some employee rights in exchange for CGT-advantaged shares in their employer. We covered the consultation launch in this post.
The consultation response is here.
From the executive summary of the consultation response:
“Whilst a very small number of responses welcomed the scheme and suggested they would be interested in taking it up, a number of specific issues were raised through the consultation. These relate to concerns about the potential impact on individuals and how the shares would work. There was a strong concern that individuals were losing important employment protections and that they might be coerced to take on employee owner status. There was also a concern that employee owner status could be misused by businesses, and that the tax advantages could be abused.
There was a particular concern that the new status would be complex and costly to operate, with uncertainty around valuation and income tax implications for individuals. These were viewed as likely to deter take-up. The Government is considering options to reduce income tax and National Insurance contribution liabilities that arise when employee owners receive their shares. Those who thought there would be some take-up suggested that it would be limited to micro-businesses and some growing companies.
The Government acknowledges the concerns for individuals and has already stated that the new status is voluntary. In response to issues highlighted in the consultation, the Government intends to provide further clarity, consistency, and flexibility – both through guidance for individuals and businesses and through the
legislation which underpins the new status. On Clause 23 of the Growth and Infrastructure Bill, the Government has introduced amendments to clarify the nature of the shares awarded, remove specific risks of liability on the employee owner, and ensure that shares are issued free of charge to them. Other changes include:
a. Enabling the Secretary of State to increase the minimum share value of £2,000;
b. Removing the upper threshold of £50,000 – to allow businesses to offer more shares under the scheme, but not raising the £50,000 exemption from CGT;
c. Changing the notice period for return from additional paternity leave to 16 weeks so it is consistent with change in the notice period for return from maternity and adoption leave;
d. Allowing non UK-registered companies to benefit from the status; and
e. Allowing shares to be issued by both the employing company and its parent company to ensure the scheme is sufficiently flexible to encourage widespread appeal.
The Government will provide employment status guidance for use by businesses. The advice will cover the three employment statuses: employee owner, employee and worker. With appropriate guidance, employers will be better informed and better equipped to determine the right status for their company and how to implement it.
In addition, we have reflected on the employee owner name, and consider it should be changed to better describe the status, and intend to re-name it employee shareholder. We will bring forward a further amendment in the Growth and Infrastructure Bill to make this change.”