ESS Employee Shareholder Status
The Employee Shareholder Status (“ESS”) allowed an employer the ability to offer tax-favoured equity participation to their employees. This was a scheme which, certainly until very recently, was common in private equity company arrangements.
ESS arrangements give an employee at least £2,000 of free shares (which are tax and NIC free too on award), although up to £50,000 of shares can be awarded on a taxable basis. Gains on shares awarded before March 2016 are completely tax free on sale, although only £100,000 of gains on shares awarded since March are tax free.
The scheme has now been withdrawn, though there are transitional provisions where, perhaps unusually, where the independent advice has already been given. In such cases, the relevant employee shareholder agreement must be entered into by 1 or 2 December depending on the timing of that advice.
Schemes already in place will maintain their tax advantaged status.
ESS was a brainchild of George Osborne and even he, as doting father, found he had to clip its wings by capping the CGT exemption earlier this year.
With a new Chancellor, it is no surprise that the scheme has been abandoned entirely.
If you have any queries regarding this or any other incentive arrangements then please get in touch.