National Employee Ownership Day 2014

Fri 04 Jul 2014

National Employee Ownership Day – 2014 is the best year yet!

Whilst we might all first associate 4^th July with US Independence Day (and we certainly send our celebratory good wishes to our colleagues at Weiser Mazars in New York and to all our clients and contacts in the US) it is also National Employee Ownership Day in the UK.

4^th July has, since 2012, been designated National Employee Ownership Day (EO Day) in the UK and we feel that 2014 is going to be the best year yet.

The purpose of EO Day is to highlight the benefits of employee ownership to business, whether this is direct ownership, using share plans, or indirect ownership using an employee ownership trust and following the well known John Lewis model; or a hybrid approach using a combination of direct and indirect ownership.

This year is particularly exciting for employee ownership as the Finance Bill 2014 introduces a number of new tax reliefs to support wider employee ownership. It is these new tax reliefs that make 2014 the best year yet for businesses considering implementing employee ownership arrangements.

The Government has allocated £75 million annually for these new tax relief measures, which are summarised below:

• From April 2014, a capital gains tax relief on the disposal of a controlling interest of shares into a trust, where a qualifying trust is used as a vehicle for indirect employee ownership;

• From April 2014, the annual limits for awards under a Share Incentive Plan increased to £3,600 for Free Shares and £1,800 for Partnership Shares;

• From April 2014, the savings contribution limit for the Save As You Earn (SAYE) doubled from £250 to £500 (the first increase in over 20 years);

• Transfers of shares and other assets to qualifying employee ownership trusts will also be exempt from inheritance tax (IHT) providing certain conditions are met; and
• From October 2014, an income tax exemption on up to £3,600 per annum in bonuses or equivalent payments for employees of companies that are indirectly employee owned through a qualifying trust.

With the economic climate still challenging and auto-enrolment starting to bite, most companies cannot afford to pay their employees much more in cash. FDs are looking to preserve or enhance cash flow and do not wish to incur additional pay outlay, especially when you add on the on-costs of NICs, pensions and other benefits dependent on salary rates. Instead, companies are increasingly looking to provide rewards in the form of shares, because equity pay can be designed to give corporate tax deductions, no income tax or NICs and no cash flow out of the business. If profits go down, pay-outs from equity awards could be cut back too, creating a true alignment of pay for performance.

For those of you who would like to see the empirical evidence that employee ownership improves corporate performance, have a look at the employee ownership index here.

To celebrate EO Day we are offering a free initial consultation call or meeting to any business looking to discuss matters further. Visit our webpage here to make contact with Liz Hunter to arrange this.

Also, just a reminder that today is the last day for finalising all share plan and employment-related securities annual compliance returns, Form EMI 40 and Form 42 to be filed with HMRC by 6 July and Forms 39 (re SIP), Form 35 (re CSOP) and Form 39 (re SAYE) to be filed by 7 July. If the compliance is something that you would like to outsource next year then we would be pleased to act as your Employment Related Securities agents to help you with the filing obligations.