On 17 July 2014 HMRC and HM Treasury published an “open” consultation document addressing the possible introduction of a new “employee shareholding vehicle”. This follows a recommendation from the OTS, resulting from its review of unapproved share schemes. Any new vehicle could offer a more cost-effective, and less complex, alternative to setting up an employee benefit trust.

The primary purpose of the consultation is to gather views from interested parties to gauge the likely level demand for such a vehicle.

With the goal of encouraging further employee share ownership, the following tax exemptions could be available to an employee shareholding vehicle:

  • a simplified inheritance tax exemption
  • a more relaxed capital gains tax exemption (where gifts of employee shares are subject to income tax), to encourage the use of UK-based employee shareholding vehicles
  • potentially, an exemption from the corporation tax charge on close company loans
  • stamp duty exemptions (but only if necessary to ensure the new vehicle is not placed at a disadvantage when compared to other types of employee scheme)
  • a possible exemption from the scope of Part 7A of ITEPA 2003 (disguised remuneration rules)

A number of “safeguards” are also proposed, against the backdrop of a concern that any new vehicle could be used for tax avoidance.

Responses to the consultation are sought by 10 October 2014. A more “formal” consultation will follow, on the detail of any required legislation, if the government decides to press ahead with plans for an employee shareholding vehicle.

To view the consultation document, click here.