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Tax incentives for employee ownership schemes

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16th Jan 2012
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Businesses offering place share ownership schemes to their employees may be given tax breaks, Nick Clegg said today.

The deputy prime minister told an audience in the City that the government planned to reform the tax system in order to encourage employee ownership. Alongside a tax break for employers, the government will also evaluate whether to introduce the right for workers to request shares in their companies, Clegg said.

The deputy prime minister urged firms to follow the model of department store John Lewis, which is owned by its employees and shares its profits between them.

Clegg said: “We don't believe our problem is too much capitalism - we think it's that too few people have capital,” he said. “We need more individuals to have a real stake in their firms. More of a John Lewis economy, if you like.

“And what many people don't realise about employee ownership is that it is a hugely underused tool in unlocking growth.”

He added that firms who provide ownership schemes for their employees often better perform than their employees. 

However, accountancy firm James Cowper said employee share ownership schemes will have little benefit for the majority of firms, and may even result in employees facing high tax charges.

Sharon Bedford, a Business Tax partner in James Cowper’s Oxford office said: “For the vast majority of privately owned businesses it is a tax nightmare and offers no real incentive for employees.”

She added: “Because of mind-bogglingly complex changes made to the tax rules by Gordon Brown in 2003, employees may find themselves facing an upfront tax charge on receipt of any shares and then find that there is no way for them to benefit from ownership. Share ownership is also unlikely to result in any greater say in the running of their company.”

Shadow business secretary Chuka Umunna said Clegg was following Labour’s lead on responsible capitalism. Umunna said: “Ed Miliband has led calls for a more responsible capitalism and, despite having first scorned Labour's initiative, David Cameron now claims he has become a convert to the cause.”

He added: “The question for both him and Nick Clegg is whether they have the courage or the conviction to make the change that is needed.”

At today’s event, hosted by the City of London Corporation and the Centre Forum think tank, Clegg also called on companies to open their books and show how much is spent on executive pay. 
Business secretary Vince Cable is expected to unveil a full package of boardroom reforms next week.  
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By Mark Lee
17th Jan 2012 23:43

Hmmm

Wonder if Mr Clegg understands that John Lewis is NOT a partnership AND that its employees do NOT hold any shares in the company. The shares are held in trust for them.

The profits shared with John Lewis employees are paid out as bonuses and taxed through PAYE.

Mark

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By pauljohnston
18th Jan 2012 22:29

Naughty Mark

Mark most MPs need an accountant to do his or her tax return so expecting Mr Clegg to understand share ownership I think is hopeful.

I did note that he did not talk to you or other experienced practioners before making the announcement.

Must have been quiet time in Westminster

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By Fred Smith
18th Jan 2012 21:31

E'ee Stakes

Lehman Bros staff had a large stake in their employer.....

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By Ian Bee
19th Jan 2012 10:19

Employee ownership

As did Enron employees

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