THE Government’s planned Capital Gains Tax-free employee shareholder scheme may be good news for some but will fail to help the small businesses it is aimed at, financial and business advisers Grant Thornton has warned.

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The scheme means that, from April 6, 2013, employees may be offered the option to receive a minimum of £2,000 worth of employer shares in exchange for releasing some of their employment rights such as redundancy and maternity provisions.

But Amanda Stapleton, senior tax manager at Grant Thornton East Anglia, says the scheme is unlikely to be an attractive proposition for the average employee as most people in the current economic climate are not in the position to invest in a company.

She also says the complex and ambiguous scheme could bring a number of challenges for small businesses:

“The scheme seems a little out of touch with reality in that it does not cater for the small businesses it is designed to help,” she said.

“There is also confusion surrounding key areas such as who will buy back the shares when an employee leaves, what constitutes a ‘reasonable’ price, and in what timeframe.

“Therefore, if an employee decides to leave and knows the employer will buy the shares back, it provides little incentive for them to stay which could mean employers are left paying a high price.”

Under the scheme, the Government will exempt gains on up to £50,000 of shares acquired by employee shareholders from capital gains tax from April 6, 2013.

The Government is also considering options to reduce Income Tax and National Insurance Contribution (NIC) liabilities that may arise when employees receive their shares. One option would mean that the first £2,000 of shares received under the new status would be free from income tax and NICs.

Amanda Stapleton added: “Despite best intentions with this scheme, the Government needs to focus on helping the majority of businesses by implementing ideas that are simple to achieve and flexible enough for a range of companies to benefit.

“These could include incentives to accelerate the release of capital and loans to businesses of all sizes which would help confidence to return and mean that businesses are more willing to invest in and hire talent.”

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