Charlotte Fleck of Pett Franklin, solicitor
Stories about rising inequality and the UK’s poor productivity growth seem to be all too common in the news. Employee ownership is only part of the solution – but it’s an important one! Employees need to know that when the business they work in succeeds, they can share in the value they’ve helped to create.
Awareness is part of it – lots of business owners don’t know what their choices are or realise how well employee ownership can work for them too. But the legislation could be made easier and more flexible to use, as well. We regularly see serious problems with EMI plans come to light on due diligence exercises, and SIP and SAYE are difficult for small companies to administer cost-effectively – when SMEs employ such a large proportion of UK workers, it can’t be right for them to find tax-advantaged plans so hard to use.
What do they want to achieve? How can employee ownership help them do it? Sharing value with employees shouldn’t mean the existing owners lose out – it should be a win for everyone.
There’s a lot of uncertainty right now – on a broad scale, about Brexit and the shape of future legislative changes, and more narrowly, with HMRC having withdrawn advance agreement of share valuations in most contexts and become more focused on raising revenue than giving approvals. Share plans can be a way to incentivise employees while managing risk, and their advantages aren’t going away, but I think we’ll also see more governance scrutiny and a move to simpler structures which are easier to administer and create less of a compliance burden.
Employee Ownership Trusts keep gaining momentum – they’ve got more companies than ever thinking seriously about how to make their employees a real part of the future of the business.
We’re often dealing with legislation that’s evolved out of a complex interaction of its original goals with ad-hoc changes over the last decade or more, not to mention the volumes of HMRC guidance on top of that. It’s not that I lack affection for Part 7 ITEPA, but it does seem like the law could benefit from rethinking and simplification. That would be a huge undertaking, though, and I doubt we’ll see the political will and resources needed for it any time soon – so in the meantime, I’d settle for raising the CSOP limit to £60,000 and making it index-linked.
“Sharing the wages of capital” is a snappy tagline, but it’s true – it’s a way to make capitalism work for everyone, so no wonder it’s popular on both the left and the right.
Practitioners in this area are often competitors, but having an organisation that lets us work together for the common good is vital. I’m looking forward to seeing the output of the Worked Examples Group in future – in my experience, if employers have to deduct tax on share awards, it is what it is; but not knowing whether or how much tax is due is far more difficult to deal with. It’s a great example of an initiative that benefits everyone in this area.
Sunday mornings with a cup of coffee, a good book and the cat purring noisily on my lap.
I’d like to say my incisive legal analysis, but I suspect the continual attempts at ironic humour are really more apparent to bystanders. (To see ourselves as others see us….)