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Income tax relief and CGT exemption on shares to end.

The income tax reliefs and capital gains tax (CGT) exemption will no longer be available with effect from 1 December 2016 on any shares acquired in consideration of an employee shareholder agreement entered into on or after that date.

Legislation will be introduced in Finance Bill 2017 to amend Chapter 12 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003 so that the full value of shares received as consideration for entering into an employee shareholder agreement constitutes earnings of the recipient.

Consequential changes will be made to the Corporation Tax Act 2009.

CGT will be chargeable on all gains accruing on disposals of shares received as consideration for entering into an employee shareholder agreement. Losses on such disposals will be allowable losses.

Section 385A of the Income Tax (Trading and Other Income) Act 2005 will be omitted so that if an issuing company buys-back from an employee shares that were issued to that employee as consideration for entering into an employee shareholder agreement, the payment given by the company may be taxed as a distribution in respect of those shares.

These changes apply only to shares acquired in connection with employee shareholder agreements made on or after 1 December 2016.

Article from ACCA In Practice