We recently published an article here about the Government's proposals to introduce a new type of employment status, dubbed the 'employee owner' status. The proposal is that under the new status, employees are issued shares (free of charge) in return for sacrificing certain employment rights. The benefit to the employee is (i) they receive shares without having to pay for them; and (ii) the subsequent sale of those shares is exempt from capital gains tax (up to a maximum of £50,000).

In our article, we commended moves to encourage more employee ownership, but we expressed some doubt about how the new scheme could work in practice, and what the level of interest amongst employers and employees would really be.

The Government launched a consultation on the proposals. Morton Fraser was one of 209 respondents to that consultation, which closed in November. The Government has today issued its report on the public's response. The feedback received appears to have been very largely negative, with respondents citing concerns such as the scope for employers and employees to abuse the new status, and the costs and complexity of the new system (amongst other issues).

Notwithstanding this negative response, the Government does intend to proceed to introduce the new status, but (to address some of the concerns raised) it has made some changes to the proposals which include:-

  • enabling the Secretary of State to increase the minimum share value of £2,000;
  • 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;
  • allowing non UK-registered companies to benefit from the status; and
  • allowing shares to be issued by both the employing company and its parent company to allow flexibility.

It is also worth noting that they propose to change the name of this new status from 'employee owner' to 'employee shareholder'. The Government does intend to reorganise its guidance so that it covers the 3 different types of employment status - the employee, the worker and the new employee shareholder (not to be confused with employees who own shares but who are not part of this new scheme).

The creation of this new employment status will be implemented by the Growth and Infrastructure Bill which is currently making its way through the Parliamentary process.

To read a copy of the Government's Report please click here.