Nick Clegg: Government should abandon 'pet' employee shareholders scheme and use money to fund tax breaks

Out-Law News | 08 Jan 2014 | 10:44 am | 1 min. read

The Government could raise the income tax allowance to £10,700 if it scrapped its "pet projects" including the employee shareholders scheme and new married couples' tax allowance, the Deputy Prime Minister has said.

Speaking at a press conference, Nick Clegg said that abandoning the controversial policies could be worth £140 "back in the pockets" of taxpayers.

Clegg's opposition to the new equity-linked employment contracts, which were made available to interested employers in September, emerged as the Financial Times reported that only 19 firms had contacted the business department about the scheme in the six months to December 2013.

At the press conference, Clegg said that he planned to press for the inclusion of a "workers' bonus" in the March Budget that would "go further" than the £10,000 income tax allowance, due to take effect from April.

"I've said that if we can responsibly find means to deliver an even higher allowance of £10,500, we should do so," he said. "That would be worth an extra £100 off the tax bills of over 20 million basic rate taxpayers."

"Maybe we can go further still. If the Conservatives were prepared to give up spending huge amounts of money on their own tax pet projects, whether it's the marriage tax break or the tax incentives encouraging people to give up their employment rights to take up shares, we could deliver a £10,700 tax allowance," he said.

Employee shareholder status is designed to be a third form of employment status, alongside 'employee' and 'worker'. In exchange for giving up certain employment rights, employees will become owners of a stake in the business that they work for by being given shares in the company worth between £2,000 and £50,000. Any profit on those shares will be exempt from capital gains tax (CGT) when the shares are sold.

In exchange, an employee shareholder will not have certain rights which a 'standard' employee would have; including those in relation to unfair dismissal, redundancy and certain statutory rights to request flexible working and time off for training. Employee shareholders will still be protected from 'automatic' unfair dismissals, such as those stemming from discrimination or as a result of whistleblowing. Existing employees cannot be forced to take up employee shareholder status, but employers can choose to offer only employee shareholder contracts to new joiners.