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Employee Shareholders

Introduction

New legislation came into force on 1st September 2013 enabling staff to take on the status of ‘employee shareholder’ in return for relinquishing some of their employment rights.

The Legislation

The new status will allow certain employment rights to be exchanged for shares worth at least £2,000. The legislation is controversial as critics suggest that there is a lack of interest in the new status.

In return for the shares, workers would give up the right to:

  1. claim unfair dismissal (except in circumstances such as whistleblowing or pregnancy);

  2. a statutory redundancy payment;

  3. request flexible working hours and time off for study.

An employee shareholder will have to give 16 weeks' notice to their employer if they intend to return early from maternity, paternity or adoption leave.

Tax Treatment

Income Tax or National Insurance Contributions are not usually chargeable on the first £2,000 of share value received by an employee shareholder. The normal rules for the taxation of employment-related securities apply to any value received in excess of £2,000.

There will usually be a Capital Gains Tax exemption for gains on the disposal of up to £50,000 worth of shares received by the employee shareholder.

Some corporation tax deductions are available to employers.

Other Matters

Employees cannot be forced to become shareholders, and will be protected against unfair dismissal if they refuse to take shares.

Prospective employee shareholders must seek independent financial advice on the terms of their agreement, the cost of which, is to be met by the employer.

This should not be relied upon for legal advice. If you would like any further information or advice please email richard@clariclegal.co.uk.

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