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CGT on employee shares

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This follows up my earlier question 

Employee/director was given shares in the company in 2009 and is now disposing of them to the company

I'm looking at the CGT implications = Entrepreneurs relief but have found this in the HMRC website

You also do not pay Capital Gains Tax when you dispose of:

employee shareholder shares - depending on when you got them

Employee shareholder shares

To be an employee shareholder, you must own shares in your employer’s company that were worth at least £2,000 when you got them.

You won’t usually pay Income Tax or National Insurance on the first £2,000 worth of employee shareholder shares you get before 1 December 2016.

Selling your shares

You might not pay Capital Gains Tax when you sell shares. It depends on when you signed your employee shareholder agreement.

Before 17 March 2016 (she signed 02/08/2010)

You only pay Capital Gains Tax on shares that were worth over £50,000 when you got them - which they weren't

Can this be true that she'll pay no CGT although the gain is over £200000??

AWEB help me not go mad by telling me why it's rubbish 

Replies (6)

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By CMP Accountant
11th Aug 2020 19:38

I believe the term 'Employee Shareholder' refers specifically to a class of employees who gave up certain statutory rights in exchange for shares.

I have never come across these myself, but do recall these being a short-lived scheme.

The Rossmartin article appears to contain a lot of detail on this;
https://www.rossmartin.co.uk/employers/benefits-shares/1079-employee-own...

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By bernard michael
12th Aug 2020 09:42

Thanks very much CMP this answers my query with one sentence which wasn't clear in the HMRC guidance:-

Introduced by the Growth and Infrastructure Act 2013, "the employee shareholder" gives up certain employment rights in exchange for £2,000 of tax free shares which are exempt from capital gains tax (CGT) on disposal

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By Bluesation
02nd Dec 2021 18:08

Bernard michael - your question seems to be the only information on AccountingWeb about ESS so I'm hoping that you learned enough, in the course of dealing with ESS yourself, to help me!

I've been approached about this topic by somebody who has sold two tranches of ESS shares for about £180K in all. Looking at the HMRC helpsheet 287 it says a £50K exemption from CGT can apply to each agreement unless they are with the same company or associated companies in which case only £50K applies overall. So that seemed clear enough.

However, it appears the company who issued him the shares (he's no longer with them) told him he had £100K exemption (presumably £50K each scheme). He's trying to dig out the original paperwork but meantime I'm wondering if I've missed something in the legislation. It still looks to me like he only gets £50K exemption.

This chap's been struggling to get advice locally so if I cannot help him I guess I'll just have to send him to one of the large firms given that this short-lived scheme is a bit 'niche'.

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Replying to Bluesation:
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By bernard michael
03rd Dec 2021 09:09

Bluesation wrote:

Bernard michael - your question seems to be the only information on AccountingWeb about ESS so I'm hoping that you learned enough, in the course of dealing with ESS yourself, to help me!

I've been approached about this topic by somebody who has sold two tranches of ESS shares for about £180K in all. Looking at the HMRC helpsheet 287 it says a £50K exemption from CGT can apply to each agreement unless they are with the same company or associated companies in which case only £50K applies overall. So that seemed clear enough.

However, it appears the company who issued him the shares (he's no longer with them) told him he had £100K exemption (presumably £50K each scheme). He's trying to dig out the original paperwork but meantime I'm wondering if I've missed something in the legislation. It still looks to me like he only gets £50K exemption.

This chap's been struggling to get advice locally so if I cannot help him I guess I'll just have to send him to one of the large firms given that this short-lived scheme is a bit 'niche'.


I worked on the £50K exemption and couldn't find anything else. As I said in my question my client generated £200000, claimed Entrepreneurs relief ( now called differently) and paid the CGT. HMRC didn't offer any queries or objections. On the face of it it appears that your case was £50K each scheme not £100K each scheme
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Replying to Bluesation:
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By Tax Dragon
03rd Dec 2021 10:32

Yes, you could do with seeing the original paperwork.

I think you have misread HS287, but anyway also looking at the legislation and manuals will help clarify. And don't forget it's a CGT exemption, not an ERS one - these shares are inevitably ERS.

Bernard would not have needed to spend too long looking to realise his client's shares could not have been ESS, as that scheme did not exist until 2013 and his client's shares were issued in 2009.

(Btw I'm not sure the scheme has been abolished, but the tax privileges were withdrawn for shares issued under the scheme after a certain date.)

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Replying to Tax Dragon:
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By Bluesation
03rd Dec 2021 17:45

Tax Dragon wrote:

I think you have misread HS287, but anyway

I'd like to believe that you are correct and it's my misreading of HS287 (so there's a £100K limit) but I cannot see how else to interpret "But a single £50,000 limit applies in relation to ESS acquired in consideration of agreements with the same company and with companies associated with that company."

It is the CGT exemption that I am seeking to clarify. I'm afraid that I do not think "these shares are inevitably ERS" though since in this case the shares are such a small holding in the company that it does not fit the definition of 'personal company' in HS275. Or have I misunderstood you and we are talking at cross purposes?

Thanks all the same.

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