Government announces Commission on Ownership

2009 Pre-Budget Report

» Equity incentives
» Enterprise management incentives ("EMI")
» Disclosure of tax avoidance schemes
» Bank payroll tax
» Tax rates
» Pensions
» Miscellaneous

Journalist and author Will Hutton [pictured] is to chair an independent Commission on Ownership, the Government has announced. Speaking at London’s Westminster Hall on 15 December, Cabinet Office Minister Tessa Jowell MP said the new Commission would study links between ownership and community and staff engagement in the public sector, and customer service, staff engagement, risk and entrepreneurialism in the corporate sector.

The Commission is to be hosted by the Oxford Centre for Mutual and Employee Owned Business, in which EOA is a partner along with Mutuo, its counterpart in the mutuals sector, and Oxford University. EOA members John Lewis Partnership are to be represented on the Commission. Starting work in February 2010, the Commission is expected to report within 18 months. It will publish interim papers, host seminars and other events, and commission new research.

EOA executive director Patrick Burns welcomed the initiative: “Employee ownership is already making a significant and growing contribution to the UK economy, as last year’s All Party Group report confirmed. An independent Commission offers a superb opportunity to explore the potential for employee ownership to play a bigger role in both public services and the traditional business sector. As partners in the Oxford Centre for Mutual & Employee Owned Business, the Commission’s hub, the Association and its member companies will play a central role in this important initiative.”

Link to Daily Telegraph article about the Commission

Link to Guardian article about the Commission by Tessa Jowell MP .

2009 PRE-BUDGET REPORT

This section of the EOA e-Bulletin is written by Graeme Nuttall, legal adviser to the EOA and tax Partner with Field Fisher Waterhouse LLP.

A rumoured major boost to employee share ownership did not materialise in the PBR 2009.  Instead, the emphasis remains on ‘housekeeping’ and counter-acting tax avoidance:

PBR 2009 included a detailed HMRC document on EMI.  However this relates to previously announced changes to ensure compliance with European Union law. 

A consultation document on the disclosure of tax avoidance schemes proposes the extension of this regime to cover schemes that seek to avoid tax in relation to employment income or gain a tax advantage by substituting a capital receipt for income.  This will impact on the design and implementation of share plans.  Helpfully, it is planned to exempt HMRC approved share plans and (with some qualification) EMI from the disclosure regime.  EOA members who wish to take part in the consultation should submit responses by 19 February 2010.

A headline item is bank payroll tax.  Anyone affected or just interested should read the draft legislation and detailed explanatory notes.  This time limited additional 50% tax applies to a wide range of financial businesses and is charged on bonuses over £25,000 paid to any employee whose duties are connected with various Financial Services Authority regulated activities.  The tax will not, however, be charged on awards under share incentive plans or SAYE option plans.

The increase in national insurance contribution rates from 6 April 2011 will now be 0.5% higher than previously announced.  The employer's rate will, for example, be increased to 13.8%.

Other tax rate changes include the expected return to a VAT standard rate of 17.5% from 1 January 2010, although the planned small companies' corporation tax rate increase from 21% to 22% is deferred until 2011.  The top rate of income tax remains set to increase to 50% from 6 April 2010.

Previously announced restrictions on tax relief for pension contributions have been further tightened.  The impact of employer pension contributions needs careful consideration for those paid £130,000 or more.

There is much detail in the PBR 2009.  Particular EOA members might be interested in a refinement to the R&D tax relief rules or incentives for electric vans and cars used by employees.  A restriction on the tax exemption for workplace canteens illustrates the Government's current determination to limit the benefit of tax reliefs.

The full list of proposed changes is available from the HMRC website at http://www.hmrc.gov.uk/pbr2009/notes-pdf.htm