The employee shareholder status ending after a relatively short life seemed a disappointing step-back in the drive for wider employee ownership. However, the Government has kept in place an exit option to shareholders who are looking to place the ownership of the company into employee hands.
The tax rules introduced for this type of trust permit:
- The deferral (and potential complete exemption) of capital gains generated on the transfer of qualifying shares to the trustees;
- An inheritance tax exemption where value is transferred to the trustees;
- Up to £3,600 income tax exemption in relation to certain employee bonus payments.
This is only available to trading companies and the transfer must assist in creating a controlling interest for the trustees.
Whilst appreciating the appeal of selling a tax-free interest in your company, you should not underestimate the practicalities and cost of running an employee-ownership trust. That said, it could well be part of the answer to your succession question!