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Should employee share ownership schemes qualify for tax breaks?

Should employee share ownership schemes qualify for tax breaks?

Deputy Prime Minister, Nick Clegg, hinted recently that tax breaks may be available to firms that offer employee share ownership schemes.

Mr Clegg said the government intends to reform the tax system in a way that will encourage employee ownership. As well as tax breaks for employers, the government is considering whether employees should have the right to ask for shares in the firm they work for.

The deputy PM went on to urge companies to follow the example of John Lewis. The high street department store is owned by its employees, all of whom get a share of the profits. The UK needs more people to own a stake in the firm they work for, he continued, and it has been proven that companies with employee ownership schemes often perform better.

However, employee share ownership schemes have little benefit for the vast majority of private companies, according to Sharon Bedford from James Cowper. She said staff might face higher tax charges as a result and from the firm’s perspective, employee share ownership is a tax nightmare.

She went on to explain that Gordon Brown made complex changes to the tax rules in 2003 that could leave employees facing an upfront charge as soon as they receive company shares. It’s also unlikely that share ownership would give them a greater say in the way the company is run.

Both David Cameron and Ed Miliband have called for a more responsible capitalist society in the UK. But the question is, does the coalition have courage to make the necessary changes?

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Image: Palm Trees by ajcreencia

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