The UK government has published its response to a consultation paper on the Chancellor’s proposal for a new employment status, previously ”employee owner” but to be renamed “employee shareholder”. To obtain this status, individuals would give up some employment rights in exchange for capital gains tax (CGT) exempt shares in their employer. The Growth and Infrastructure Bill will introduce the new status and is currently being considered in committee. The government has tabled amendments to the Bill reflecting aspects of its response to the consultation.

Respondents to the consultation included only a “very small number” who welcomed the proposed new status and anticipated using it. Nevertheless, the government will proceed with the legislation.

The government plans to reorganise its guidance on employee, worker and employee owner status, to assist businesses to use these appropriately. There will be new guidance for individuals about the personal consequences of the new status, and guidance for businesses about its implementation, including guidance on valuation and forfeiture of shares.

Other aspects of the government response include:

  • requiring employee owner shares to be fully paid up, and that individuals must give no consideration for them other than agreeing to be employee owners
  • allowing non UK-registered companies to use employee owner status. It will also be possible to issue parent company shares to employee owners, rather than employer shares, where the employer is a subsidiary
  • removing the upper limit (£50,000) on the value of employee owner shares, although this value will be retained as an upper limit (as at the time of acquisition) on the value of shares qualifying for the CGT relief
  • requiring employee owners to give 16 weeks’ notice of return from additional paternity leave, rather than six (in the same way as for additional maternity leave).