CIOT: Tax advisers welcome changes to employee ownership structures

The Chartered Institute of Taxation (CIOT) has welcomed the Government’s decision to provide capital gains tax (CGT) relief for business owners upon transferring ownership to employees.

In draft Finance Bill clauses published today the Government has confirmed that it will provide a CGT relief for owners of limited liability companies upon the transfer of a controlling interest in a trading company to an employee owned structure. The Government also propose to allow employee owned companies to pay up to £3,600 per annum free of income tax to employees as an earnings bonus.

John Barnett, Chairman of the CIOT Capital Gains Tax sub-committee, comments:

“We are pleased with the Government’s commitment to supporting and encouraging employee ownership.

“The proposals also include a generous income tax exemption in respect of a bonus or similar payment to employees from the business and we welcome the commitment to keep the operation of the exemption as simple as possible. However, it should be noted that NICs will be payable on the bonus payments: this is a change from the original proposal. Also, it is not clear to us why indirectly employee-owned businesses are to be favoured with this exemption and not, for example, directly owned employee businesses.

“While these changes are designed to encourage employee ownership of companies, the continuing attack on employee benefit trusts generally, and the disguised employment proposals which will affect partnerships bringing employees in as partners, sends mixed messages to employers who want to grow their business through greater employee involvement.

"While anything which improves employee-ownership is to be welcomed, the CIOT does have some concerns that these measures only address half the story as they would have benefitted from a more wide-ranging and better thought-out approach to the whole area of employee-engagement."

Notes for editors

1.       A copy of the Draft Finance Bill 2014 can be found here.

2.       The Chartered Institute of Taxation

The Chartered Institute of Taxation (CIOT) is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. Through our Low Incomes Tax Reform Group (LITRG), the CIOT has a particular focus on improving the tax system, including tax credits and benefits, for the unrepresented taxpayer.

The CIOT draws on our members’ experience in private practice, commerce and industry, government and academia to improve tax administration and propose and explain how tax policy objectives can most effectively be achieved. We also link to, and draw on, similar leading professional tax bodies in other countries.  The CIOT’s comments and recommendations on tax issues are made in line with our charitable objectives: we are politically neutral in our work.


The CIOT’s 17,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Matthew Oliver

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Chartered Institute of Taxation
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