The income tax and CGT reliefs associated with employee shareholder status (ESS) will be abolished for ESS shares acquired in consideration of an ESS agreement made on or after 1 December 2016 (except in circumstances where an employee received independent legal advice on the ESS agreement on 23 November, before 1.30 pm, in which case the effective date is 2 December 2016). For ESS arrangements entered into before 1 December 2016, the tax advantages will continue to apply.

Currently, ESS shares qualify for certain income tax and capital gains tax (CGT) reliefs, but the CGT relief was restricted, following the 2016 Budget, in relation to agreements entered into after 16 March 2016, to a lifetime allowance of £100,000 For more information on ESS, see Practice note, Employee shareholders.

The government notes that the measures to remove ESS tax advantages are in response to evidence that ESS is being used for tax planning.

ESS technically remains open for the time being, because the provisions to be included in Finance Bill 2017 do not amend the Employment Rights Act 1996 (ERA 1996). However, the government intends to close ESS to new users altogether (presumably by amending the ERA 1996) "at the earliest opportunity". However, without the associated tax reliefs, in our view it is very unlikely any new ESS arrangements will be implemented, as these were the main driver for implementing ESS arrangements.

Although it may have come as a surprise to some that ESS is being withdrawn altogether, the restriction of the CGT relief available for ESS shares earlier this year indicated the direction that the government might take in future over ESS.

(HM Treasury: 2016 Autumn Statement, paragraph 4.31, Income Tax and Capital Gains Tax: employee shareholder status, 2016 Autumn Statement: policy costings, page 27 and Parliament.uk: House of Commons: Written Statement HCWS277, 23 November 2016 .)

In the 2016 Budget, the government announced a number of measures to tackle the use of disguised remuneration (DR) arrangements, including introducing an income tax charge on outstanding DR loans not repaid by 5 April 2019 (see Legal update, 2016 Budget: key share schemes announcements: Measures to be included in future Finance Bills).

In August 2016, HMRC issued a technical consultation on the measures. That document proposed some additional measures, including denial of corporation tax relief for DR arrangements in some circumstances, and proposals to introduce legislation to deal with schemes that did not fall within Part 7A but that had the same objective, including certain arrangements involving self-employed individuals (see Legal update, Disguised remuneration: HMRC issues technical consultation document).

In the Autumn Statement, the government announced that it will extend the measures announced in the 2016 Budget to similar schemes used by self-employed individuals. A tax charge will be imposed on any outstanding loans made under DR-type schemes used by self-employed individuals if the loans are not repaid by 5 April 2019.

The government has also announced it will take steps to deny corporation tax relief for contributions to DR schemes from April 2017 unless income tax and NICs are paid (through PAYE) at the time the contribution is made or within 12 months of the end of the accounting period in which the deduction is claimed.

The response to the HMRC consultation on the DR proposals, together with draft legislation for Finance Bill 2017, is expected to be published in the draft Finance Bill on 5 December 2016.

(2016 Autumn Statement, paragraphs 4.46 and 4.47 , 2016 Autumn Statement: policy costings, page 25 and Autumn Statement 2016: tax updates and technical changes policy paper, page 3.)

For information about the key business tax announcements, including announcements about salary sacrifice arrangements, see Legal update: archive, 2016 Autumn Statement: key business tax announcements, and for information about the key private client announcements, see Legal update: archive, 2016 Autumn Statement: key private client announcements.