No entrepreneurs’ relief for employees

CGT relief not extended to the Enterprise Management Incentive

Business owners have expressed disappointment over entrepreneurs’ relief not being extended to employee share schemes.

In his Budget speech on Tuesday, chancellor George Osborne announced the 10% capital gains tax (CGT) rate for entrepreneurial business activities will be extended from the first £2m to the first £5m of lifetime gains.  However, many hoped this relief would widen to include employees who are beneficiaries of Enterprise Management Incentive (EMI) schemes.

Introduced in 2000, EMIs are schemes that enable companies to attract and reward staff by offering them equity shares in the business. Many small, entrepreneurial companies who are not able to match the salaries of their competitors often take advantage of this to incentivise their employees.

Tom Elliott from Horwath Clark Whitehill accountancy firm, told Startups: “The chancellor had a difficult challenge on Tuesday, but the government could have better aligned the interests of entrepreneurs and their employees by extending the qualifying conditions to include all employee shareholders, as was the case under taper relief up to April 2008.”

David Hathiramani, director of online tailoring company A Suit That Fits, expressed frustration over the measures. He plans to introduce a company share scheme for his employees.  However he maintained the proposals would not stop him from going ahead with the scheme, despite it being “less of a sweetener” for his employees.

Elliott added: “The scope of EMI is very much across the board, so the effects will be felt by companies in all industries.

“While the news is not as good as was hoped for start-up companies, EMI share schemes remain an attractive proposition to reward employees.”

© Crimson Business Ltd. 2010


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