Skip to main content
Insight

Major tax and financial boost for employee ownership and Nuttall Review recommendations

The employee ownership business model gets a major tax and financial boost in today's Budget announcements. There is funding available from 2014 to promote employee ownership and, in particular, a new The employee ownership business model gets a major tax and financial boost in today's Budget announcements. There is funding available from 2014 to promote employee ownership and, in particular, a new capital gains tax ("CGT") relief. Also, the Government will look at further incentives in this area.

The Chancellor's 2013 Budget Day statement said:

"Employee ownership helps create an enterprise culture. So we’re making our new employee shareholder status more generous, with NICs and income tax relief. And we’re introducing CGT relief for sales of businesses to their employees."

First of all, let's be absolutely clear that employee shareholder status is not a Nuttall Review recommendation and it is not seen by the mutual and employee ownership sector as "employee ownership". I have taken a positive approach to employee shareholder status and believe the measure has incidental benefits for employee ownership (as defined in the Nuttall Review). One of the points I made was that the tax reliefs for employee shareholder status, together with increased tax breaks for enterprise management incentives were encouraging signs that the Government might yet introduce tax changes to encourage employee ownership.

This optimism was well placed. The Government has today announced it will introduce a new CGT relief (I would expect this to be a complete exemption from CGT) on qualifying disposals of a controlling interest in a business into an employee-owned structure from April 2014. The Government will provide £50 million annual funding from 2014-15 to support employee ownership, which will include the cost of this relief.  The Government has again confirmed its support for employee ownership as envisaged by the Nuttall Review.

The full detail from the Budget Report is:

"The Government supports employee ownership as a business model and welcomes work by the Implementation Group on Employee Ownership to take forward the recommendations of the Nuttall Review. In order to further incentivise growth of the sector, the Government is providing £50 million annually from 2014-15. This will be used to respond to recommendations from the Nuttall Review and other relevant organisations who aim to encourage employee ownership. It will also be used to fund the introduction of a capital gains tax relief on the sale of a controlling interest in a business into an employee ownership structure. Consultation on this measure will take into account the progress of work by the Department for Business, Innovation and Skills and the Implementation Group to develop an ‘off the shelf’ employee owned company model, with the intention that the new capital gains tax relief will be introduced in Finance Bill 2014. The Government will also look at further incentives in this area, including measures targeted at employees through indirect ownership models."

The new CGT relief will help overcome all the obstacles to promoting employee ownership as identified in the Nuttall Review: it will clearly raise awareness, it will help increase resources by providing a tax relief and will simplify converting an existing business into to employee ownership.

Sign up to our email digest

Click to subscribe or manage your email preferences.

SUBSCRIBE