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Why say something twice

This article provides an update on the HM Treasury ("HMT") review of employee ownership and encourages final submissions on points of detail.HMT is making good progress with its review to examine the This article provides an update on the HM Treasury ("HMT") review of employee ownership and encourages final submissions on points of detail.

HMT is making good progress with its review to examine the role of employee ownership in supporting growth, and the options to remove barriers, including tax, to its wider take-up (as announced in Budget 2012).  HMT is working with the team at the Department for Business Innovation & Skills ("BIS"), that supported the Nuttall Review, and with HM Revenue and Customs ("HMRC"), and will conclude its review ahead of the Autumn Statement 2012.

There are two helpful dynamics that bolster what HMT is doing.  The first is the follow up work by BIS on the Government's formal response to the recommendations in the Nuttall Review.  The BIS evidence base has been passed to HMT.  There is also the review of unapproved share schemes by the Office of Tax Simplification ("OTS").  The OTS interim report raises some good points relevant to employee ownership.  But neither of these initiatives focus on the tax aspects of employee ownership.  There could be valuable experience and ideas that have not yet reached HMT.

Anyone who has been too shy or busy to express their detailed views on the tax aspects of employee ownership needs to be bold or find the time now.  Anyone who has ever had anything material to say about the tax aspects of employee ownership, but has not told HMT, BIS or the OTS about it this year, needs to say it again.  The Talking Heads advice that having said something once, "why say it again?", could be wrong in this case.  HMT's internal review is looking at taxation barriers to employee ownership.  It wants to understand in detail how the tax system impacts on establishing and maintaining employee ownership business models.  The analysis has passed beyond the general.  There is no point merely asserting "we need tax changes"; now is the time to formulate what and why.  If you are keeping something relevant to yourself, please say it or repeat it now.

HMT is taking evidence from industry bodies such as the Employee Ownership Association.  The experience of companies and their owners is vital to illustrate problem areas.  Especially important are the views of those companies that are interested in employee ownership but have not yet adopted it.  HMT is, for example, meeting two clients of Field Fisher Waterhouse LLP that have stalled on their employee ownership plans for, between them, over 10 years because the tax treatment is not right for them.

Areas where specific evidence may help include in relation to:

  1. the guidance that HMRC provides;

  2. ensuring all models of employee ownership are equally promoted by the tax system;

  3. showing that the conventional corporate group business model discriminates against groups where an employee benefit trust ("EBT") is effectively the parent company;

  4. ways in which the tax system could be used to finance employee buy-outs;

  5. using tax reliefs to promote employee ownership, through raising awareness  of this business model;

  6. changes that would make it easier to establish and administer an EBT; and

  7. particular obstacles facing employee owned companies when operating tax advantaged share plans.


 

Nothing above should be taken as indicating in any way that tax changes are planned by the Government.  HMT's evidence gathering phase is still underway and will conclude around the end of September 2012.

Anyone wishing to make a submission in relation to HMT's review of employee ownership may use the BIS employee ownership email address (employeeownership@bis.gsi.gov.uk ).  BIS will collate and forward submissions to HMT.

Please also remember that BIS is also consulting on some non-tax recommendations and seeks your views (see further http://www.bis.gov.uk/consultations/employee-ownership-nuttall-review-call-evidence and 'Responding to Nuttall – three immediate steps' Company Secretary's Review, 1 Aug 2012 ).

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