UK: Tax Relief Proposed; "Rights for Shares" Defeated

The 2013 UK budget includes £50 million ($76 million) for "a capital gains tax relief on the sale of a controlling interest in a business into an employee ownership structure" and notes that the intent will be to include this relief in the 2014 finance bill. Iain Hasdell of the UK's Employee Ownership Association calls the measure "a good start," but expressed disappointment that it would not take effect immediately.

Last week, Deputy Prime Minister Nick Clegg proposed an additional incentive, consisting of "a relief on tax on bonuses paid through benefit trusts, where a significant chunk of the business is owned by employees." He noted, "The Cass Business School concluded in 2010 that employee-owned businesses are between nine and 19% more productive than traditionally structured companies."

The Chancellor of the UK, George Osborne, proposed a plan in October to encourage employers to offer shares to employees in exchange for their voluntary relinquishment of certain employment rights. Dubbed the "Rights for Shares" plan, the proposal had been widely criticized. On March 21 the House of Lords rejected it, with Lord Forsyth calling it "positively dreadful," and Lord Adonis arguing that "when you have a totally mad idea like the one before us, the best thing is not to test it out but to kill it at birth."