The government has been consulting about, and promoting legislation for, a proposed new "employee shareholder" employment status (originally named "employee owner" employment status) since 8 October 2012. Employee shareholders will lack certain employee protections and rights. Each will receive shares (worth at least £2,000) in consideration of becoming an employee shareholder, and will enjoy a capital gains tax (CGT) exemption on disposals of such shares (worth up to £50,000 when acquired).

For more information about the employee shareholder employment status, see Legal updates, Government response to consultation on employee owner (employee shareholder) status and Employee shareholder (employee owner) status: third reading amendments.

The 2013 Budget included further details about the tax treatment of employee shareholder shares.

The employee shareholder tax provisions are expected to come into effect on 1 September 2013, at the same time as the separate legislation introducing the employee shareholder employment status (which is in the Growth and Infrastructure Bill). This is consistent with an earlier announcement that the new status would be implemented in autumn 2013 (see Legal update, Employee shareholder status: implementation delayed until autumn 2013).

The draft legislation for the employee shareholder CGT exemption has been revised:

The relevant income tax and National Insurance contributions (NICs) legislation will be amended to deem, for tax and NICs purposes, that an employee shareholder pays £2,000 for their employee shareholder shares. (The 2012 Autumn Statement included an announcement that this was under consideration.) These changes will eliminate income tax liabilities on acquisition for employee shareholders receiving the minimum value of employee shareholder shares (assuming that the employee does not enter into a section 431 election to tax the unrestricted value of the shares when acquired, if they are restricted securities). However, these changes are also likely to put beyond doubt that there will be an income tax liability for employee shareholders who acquire shares worth more than £2,000, as they are likely to exclude the deduction of any other consideration given by the employee. Any tax liability on acquisition will be payable through PAYE, with associated NICs liabilities, if the shares are readily convertible assets at that time.

Draft clauses related to the income tax and CGT treatment of employee shareholder shares will be included in the Finance Bill 2013, which is expected to be published on 28 March 2013.

For more information about:

2013 Budget: Tax Information and Impact Note, Employee shareholder status: capital gains tax exemption and income tax/NICs treatment.

2013 Budget: Overview of tax legislation and rates, paragraph 1.8.

2013 Budget Report, paragraph 1.133.