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Finance Act 2014

Background Note

148.The Government announced in Autumn Statement 2013 that it would provide £70 million annually from 2014-15 to support employee ownership models in order to incentivise growth of the sector. This will be in addition to the existing tax-advantaged share schemes.

149.The support is targeted at legal structures in which a trading company or group is owned by trustees which must act for the benefit of all employees (and any qualifying former employees). Structures of this kind have not until now received as much support as is given to arrangements under which employees own shares in their employer directly.

150.The CGT relief and income tax and inheritance tax exemptions further the Government’s policy of supporting existing employee-owned companies and promoting the creation of new employee-owned companies. The capital gains tax relief and inheritance tax exemption will encourage the creation of new structures through which employees can benefit from the success of their employer’s business. The income tax exemption will allow those businesses to share their successes with employees through tax-advantaged payments.

151.The Government is considering reviewing this exemption in five years’ time to monitor take up, effectiveness and whether the spend is at the appropriate level.

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