Although employee shareholder shares or ESS arrangements already in place will keep their favourable tax treatment (at least for the moment), the ability to offer tax-favoured ESS arrangements going forward has been withdrawn with almost immediate effect.

ESS arrangements gave an employee at least £2,000 of free shares (which were tax and NIC free), although up to a further £48,000 of shares could be awarded so long as income tax and NICs were paid on those extra shares. On sale, gains on any ESS shares awarded before March 2016 are completely tax free, although for shares awarded since March 2016 only £100,000 of gains are tax free - the rest is subject to normal capital gains tax treatment.

These arrangements, designed for broad employee appeal, quickly became used predominantly in executive arrangements in private companies often with geared growth arrangements. This meant that even £2,000 of shares on award could be worth many times more on a successful exit and yet be sold completely free of capital gains tax.

Their demise in the current environment is therefore not surprising, although if independent advice has already been received on the arrangements, there is still a limited opportunity to put arrangements in place.