Osborne’s proposals for ‘owner-employee’ companies

George Osborne’s novel proposal to provide capital gains tax free shares to employees who surrender their employment rights has been welcomed by some entrepreneurs and business leaders but raises some challenging tax and employment law issues.

The introduction of new ‘owner-employee’ employment contracts will allow businesses to offer staff between £2 000 and £50 000 of shares free of CGT on sale provided they give up certain employment rights. Whilst aimed primarily at fast-growing small and medium sized companies they will be open to companies of any size.

Employees must surrender their UK rights in relation to unfair dismissal redundancy flexible working and time off for training and will be required to provide 16 weeks’ notice to return to work following maternity leave (currently 8 weeks). The proposal...