Entrepreneurs were disappointed to learn that employee share schemes would be hit by the full force of the rise in capital gains tax (CGT).
In his Budget speech earlier this week, chancellor George Osborne
announced that the 10% capital gains tax (CGT) rate for entrepreneurial
business activities will be extended to the first £5m of lifetime gains
(up from £2m). However, many entrepreneurs had hoped that 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, said: “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 ASuitThatFits, 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