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Detail of outcome
This sets out the government’s response to the discussion document on the employee shareholding vehicle. Although responses were generally positive, the government has decided not to proceed with the proposal for the following reasons:
- The responses indicated support for all of the tax exemptions recommended by the OTS, with capital gains tax, the loans to participator rules, and the disguised remuneration rules all featuring particularly heavily. Responses indicated that the new vehicle would need to address all of these key issues to make it attractive and the government, as outlined in the discussion paper, believes it is unlikely to be able to do this in a way that satisfies advisers and businesses.
- The responses indicated support for the safeguards against abuse suggested by the OTS, but not the potential additional safeguards set out in the government’s discussion document. The government recognises the desire for commercial flexibility to ensure the vehicle remains attractive and, though it agrees all of the potential additional safeguards set out in its discussion document may not be necessary, the balance of opinion suggested that any of these measures would significantly reduce the likelihood of the vehicle being used.
- The number of responses received, notably from businesses and their representative organisations, did not indicate there is significant demand from those identified by the OTS as most likely to use and benefit from the employee shareholding vehicle. Moreover, advisers were generally sceptical about whether the new vehicle would significantly reduce the need for specialist tax advice or necessarily increase employee share ownership.
At Budget 2014 the government announced it would seek views on the Office of Tax Simplification’s (OTS) recommendation to introduce a new employee shareholding vehicle to make it easier for companies wishing to manage their employee share arrangements and create a market for employees’ shares. This discussion paper explores the case for change made by the OTS and the potential issues that the introduction of an employee shareholding vehicle raises. It aims to develop the understanding of the scope to introduce a simpler vehicle by seeking views on:
- the level of demand for such a vehicle should it be introduced
- the relative need and demand for the exemptions recommended by the OTS
- the effectiveness of the safeguards for the Exchequer recommended by the OTS and whether further safeguards might be necessary to protect against tax avoidance.
The government would like to receive evidence from anyone with an interest in employee share schemes, particularly employers, employees, tax professionals, and employee share scheme experts. The evidence provided will help the government decide whether or not to proceed.