The government should include a capital gains tax exemption for employee ownership trusts
This would remove a significant barrier to the creation of the trusts. It also reflects the results of the government’s recent consultations with stakeholders.
In broad strokes, employee ownership is when a company’s employees own shares in the company’s stock. The trusts are a form of employee ownership designed for succession, where an owner sells a majority of a company to employees all at once. Company shares are bought through a trustee, using borrowed money to buy these shares at fair market value. These shares are then distributed over time to all employees, not just executives, at no cost to workers.
With the American and British models, owners who sell a substantial portion of their company to employees have access to capital gains tax incentives. This works as a tax deferment for business owners, so that the employees, who received their shares free, will eventually pay taxes when they sell them.
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