Introduced by the Coalition in 2012, Employee Shareholder Status allowed companies to make highly skilled employees – or any employee – a shareholder.
For at least £2,000 worth of shares, which were both income tax and capital gains tax exempt, the employee would give up some employment rights, including unfair dismissal rights, the right to redundancy pay, the right to make flexible working requests and the right for time off to train.
The move was seen as a way of retaining high skill employees as the tax status of the shares together with a feeling of responsibility and status of being a shareholder would encourage the employee to stay.
However, the government believes the system was being abused and many employees were being made shareholders in order to avoid tax. To combat this, from 1 December 2016, any employee who takes shareholder status will not be able to benefit from the income tax and capital gains tax exemption.
Any employee who received advice on a shareholder agreement before 23rdNovember had until 1st of December to agree to it or they too will lose the tax free exemption status.