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HMRC internal manual

Capital Gains Manual

Employee shareholder shares: only first £50,000 worth of shares are exempt: qualifying shares

If an individual enters into more than one employee shareholder agreement, the£50,000 limit can apply separately to each. But a single £50,000 limit applies to ‘qualifying shares’. The limit applies by reference to the total of the values of qualifying shares at the times they were acquired.

For the purposes of applying the exemption limit a qualifying share is an employee shareholder share

  • in the employer company which entered into the shareholder agreement


  • in an associated company of that company

which share is acquired by the employee in consideration of

  • the same shareholder agreement,
  • another employee shareholder agreement with the same employer company, or
  • an employee shareholder agreement with an associated company of that employer company

A company is an associated company of another if one has control of the other or both are under the control of the same person or persons.

If a company controls another when an employee shareholder agreement is entered into with an employee, that control is treated as continuing when any subsequent employee shareholder agreement is entered into with that employee. This does not apply, however, as between two companies if one of the companies was dissolved, two years has since passed, and the employee has not in the interim ever been engaged in any office or employment or engaged under a contract for services with any company associated with the dissolved company.