Policy paper

Draft legislation (accessible version of Employee Ownership Trust)

Updated 6 November 2024

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Draft Finance Bill Measures

Employee-ownership trusts

Schedule 1 makes provision about employee ownership trusts.

Schedule 1 Section 1

Employee Ownership Trusts

Part 1

Capital Gains Tax

Introduction

  1. 1 TCGA 1992 is amended as follows.

Requirement for trustees of employee-ownership trusts to be UK resident

  1. 2 (1) Section 1 In section 236H(4) (disposals to employee-ownership trusts), before paragraph (a) insert 바카라 사이트”
    1. 바카라 사이트œ(aa) that the trustees of the settlement are resident in the United Kingdom at the time of the disposal and continue to be UK resident for the remainder of the tax year in which that time falls,바카라 사이트.
  2. (2) that the trustees of the settlement are resident in the United Kingdom at the time of the disposal and continue to be UK resident for the remainder of the tax year in which that time falls,바카라 사이트. In section 236O(2) (no section 236H relief if disqualifying event in next tax year), before paragraph (a) insert 바카라 사이트”
    1. 바카라 사이트œ(aa) the trustees of the settlement cease to be resident in the United Kingdom,바카라 사이트.
  3. (3) the trustees of the settlement cease to be resident in the United Kingdom,바카라 사이트. In section 236P (events which trigger deemed disposal and reacquisition by trustees), after subsection (3) insert 바카라 사이트”
    1. 바카라 사이트œ(3A) See also section 80 (trustees ceasing to be resident in U.K.), which provides for similar consequences in circumstances where the trustees of the settlement cease to be resident in the United Kingdom.바카라 사이트
  4. (4) In section 236Q(1)(c) (relief for deemed disposals under section 71), for 바카라 사이트œ236H(4) (a)바카라 사이트 substitute 바카라 사이트œ236H(4)(aa)바카라 사이트.
  5. (5) The amendments made by this paragraph have effect in relation to disposals made on or after 30 October 2024.

Trustee independence

  1. 3 (1) In section 236H(4), after paragraph (b) insert 바카라 사이트”
    1. 바카라 사이트œ(ba) that the settlement meets the trustee independence requirement (see section 236LA) at the time of the disposal and continues to meet that requirement for the remainder of the tax year in which that time falls,바카라 사이트.
  2. (2) After section 236L insert 바카라 사이트”
    1. 바카라 사이트œ236LA Trustee independence requirement
    2. (1) A settlement meets the trustee independence requirement if 바카라 사이트”
      1. (a) less than 50% of the trustees are persons who are excluded participators, and
      2. (b) excluded participators do not have control of the settlement.
    3. (2) In this section 바카라 사이트œexcluded participator바카라 사이트 means 바카라 사이트”
      1. (a) a person that is an excluded participator within the meaning given by section 236J, other than a person who is an excluded participator only as a result of a connection falling within section 286(3) (trustees regarded as connected with settlors etc), or
      2. (b) a company not falling within paragraph (a), if 50% or more of its directors are persons falling within that paragraph.
    4. (3) Excluded participators have control of the settlement if one or more excluded participators, acting alone or together without the trustees who are not excluded participators, have power under the trust instrument or by law to 바카라 사이트”
      1. (a) dispose of, advance, lend, invest, pay or apply settlement property;
      2. (b) vary or terminate the settlement;
      3. (c) add or remove a person as a beneficiary or to or from a class of beneficiaries;
      4. (d) appoint or remove trustees or give another individual control over the settlement;
      5. (e) direct the exercise of a power mentioned in sub-paragraphs (a) to (d).바카라 사이트
  3. (3) In section 236O(2), after paragraph (b) insert 바카라 사이트”
    1. 바카라 사이트œ(ba) the settlement ceases to meet the trustee independence requirement,바카라 사이트.
  4. (4) In section 236P(2) (events which trigger deemed disposal and reacquisition by trustees), after paragraph (b) insert 바카라 사이트”
    1. 바카라 사이트œ(ba) the settlement ceases to meet the trustee independence requirement,바카라 사이트.
  5. (5) The amendments made by this paragraph have effect in relation to disposals made on or after 30 October 2024.

Temporary breach of trustee independence requirement or residence requirement arising from death of trustee

  1. 4 (1) In section 236O, after subsection (2) insert 바카라 사이트”
    1. 바카라 사이트œ(2A) Where 바카라 사이트”
      1. (a) a disqualifying event falling within subsection (2)(aa) occurs (trustees cease to be resident in the United Kingdom),
      2. (b) the event only occurs as a result of the death of a trustee of the settlement, and
      3. (c) within the period of 6 months beginning with the death of the trustee, the trustees become resident in the United Kingdom,
      4. the disqualifying event is to be ignored.
    2. (2B) Where 바카라 사이트”
      1. (a) a disqualifying event falling within subsection (2)(ba) occurs (trustee independence requirement ceases to be met),
      2. (b) the event only occurs as a result of 바카라 사이트”
        1. (i) the death of a trustee of the settlement, or
        2. (ii) the death of a director of a company that is a trustee of the settlement, and
      3. (c) within the period of 6 months beginning with that death, the settlement meets the trustee independence requirement,
      4. the disqualifying event is to be ignored.바카라 사이트
  2. (2) In section 236P, after subsection (2) insert 바카라 사이트”
    1. 바카라 사이트œ(2A) Where 바카라 사이트”
      1. (a) a disqualifying event falling within subsection (2)(ba) occurs (trustee independence requirement ceases to be met),
      2. (b) the event only occurs as a result of 바카라 사이트”
        1. (i) the death of a trustee of the settlement, or
        2. (ii) the death of a director of a company that is a trustee of the settlement, and
      3. (c) within the period of 6 months beginning with that death, the settlement meets the trustee independence requirement, the disqualifying event is to be ignored.바카라 사이트
  3. (3) The amendments made by this paragraph have effect in relation to disposals made on or after 30 October 2024.

Consideration requirement

  1. 5 (1) In section 236H(4), after paragraph (c) insert 바카라 사이트”
    1. 바카라 사이트œ(ca) that the trustees have taken all reasonable steps to secure that 바카라 사이트”
      1. (i) the consideration for the disposal does not exceed the market value of the ordinary share capital at the time of the disposal, and
      2. (ii) where some or all of the consideration for the disposal is deferred, that the rate of any interest payable in relation to the deferral does not exceed a reasonable commercial rate,바카라 사이트.
  2. (2) In section 236Q, in subsection (1)(c), for 바카라 사이트œ(d)바카라 사이트 substitute 바카라 사이트œ(c) and (d)바카라 사이트.
  3. (3) The amendments made by this paragraph have effect in relation to disposals made on or after 30 October 2024.

Extended period for disqualifying events

  1. 6 (1) In section 236O 바카라 사이트”
    1. (a) in the heading, for 바카라 사이트œtax year바카라 사이트 substitute 바카라 사이트œfour tax years바카라 사이트, and
    2. (b) in subsection (1)(b), for 바카라 사이트œthe tax year바카라 사이트 substitute 바카라 사이트œany of the first four tax years바카라 사이트.
  2. (2) In section 236P(1), after 바카라 사이트œend of the바카라 사이트 insert 바카라 사이트œfourth바카라 사이트.
  3. (3) In section 236R 바카라 사이트”
    1. (a) in the heading, for 바카라 사이트œtax year바카라 사이트 substitute 바카라 사이트œfour tax years바카라 사이트, and
    2. (b) in subsection (1)(b), for 바카라 사이트œthe tax year바카라 사이트 substitute 바카라 사이트œany of the first four tax years바카라 사이트.
  4. (4) The amendments made by this paragraph have effect in relation to disposals made on or after 30 October 2024.

Additional information to be provided in claims

  1. 7 (1) In section 236H 바카라 사이트”
    1. (a) in subsection (7) 바카라 사이트”
      1. (i) omit the 바카라 사이트œand바카라 사이트 after paragraph (b),
      2. (ii) after that paragraph insert 바카라 사이트”
        1. 바카라 사이트œ(ba) the number of persons who at the time of the disposal are employees of 바카라 사이트”
          1. (i) C, or
          2. (ii) if C is the principal company of a trading group (within the meaning of section 236I(3)), any member of that group,바카라 사이트, and
      3. (iii) after paragraph (c) insert 바카라 사이트œ, and
        1. (d) the consideration for the disposal (including amounts of consideration due after the disposal).바카라 사이트, and
    2. (b) after that subsection insert 바카라 사이트”
      1. 바카라 사이트œ(7A) But where the person making the claim is unable to include the number of employees in the claim as required by subsection (7)(ba) because they have been unable to ascertain that number, that requirement is to be taken to be met if 바카라 사이트”
        1. (a) the person has taken all reasonable steps to ascertain that number, and 바카라 사이트”
        2. (b) the claim contains a statement that the person has taken such steps.바카라 사이트
  2. (2) In section 236Q 바카라 사이트”
    1. (a) in subsection (6) 바카라 사이트”
      1. (i) omit the 바카라 사이트œand바카라 사이트 after paragraph (b), and
      2. (ii) after that paragraph insert 바카라 사이트”
        1. 바카라 사이트œ(ba) the number of persons who at the time of the deemed disposal are employees of 바카라 사이트”
          1. (i) the company, or
          2. (ii) if the company is the principal company of a trading group (within the meaning of section 236I(3)), any member of that group, and바카라 사이트, and
    2. (b) after that subsection insert 바카라 사이트”
      1. 바카라 사이트œ(6A) But where the person making the claim is unable to include the number of employees in the claim as required by subsection (6)(ba) because they have been unable to ascertain that number, that requirement is to be taken to be met if 바카라 사이트”
        1. (a) the person has taken all reasonable steps to ascertain that number, and 바카라 사이트”
        2. (b) the claim contains a statement that the person has taken such steps.바카라 사이트
  3. (3) The amendments made by this paragraph have effect in relation to claims made under those sections on or after 6 April 2025.

Part 2

Income Tax

Participation requirement not infringed by exclusion of directors

  1. 8 (1) In section 312C of ITEPA 2003, after subsection (2) insert 바카라 사이트”
    1. 바카라 사이트œ(2A) The participation requirement is not infringed by reason of the exclusion of directors of the company from participating in an award.바카라 사이트
  2. (2) The amendment made by this paragraph has effect in relation to qualifying bonus payments made on or after 30 October 2024.

Relief for distributions to trustees of employee-ownership trusts

  1. 9 (1) In ITTOIA 2005, after section 401 insert 바카라 사이트”
    1. 바카라 사이트œEmployee-ownership trusts

401ZA Relief: distributions to trustees of employee-ownership trusts

  1. (1) This section applies where 바카라 사이트”
    1. (a) there has been a disposal of ordinary share capital of a company (바카라 사이트œC바카라 사이트) to the trustees of a settlement by a person (바카라 사이트œP바카라 사이트) other than a company,
    2. (b) the relief requirements are met in relation to the disposal,
    3. (c) C has made a payment to the trustees that is a distribution to the trustees chargeable to income tax as a result of this Chapter or Chapter 4 (dividends from non-UK resident companies).
  2. (2) On the making of a claim, so much of the trustees바카라 사이트™ acquisition costs may be deducted from the distribution (whether chargeable under this Chapter or Chapter 4) as 바카라 사이트”
    1. (a) does not reduce the amount of the distribution below nil, and
    2. (b) has not been deducted from any other distribution.
  3. (3) The 바카라 사이트œrelief requirements바카라 사이트 means the requirements set out in section 236H(4) of TCGA 1992 (disposals to employee-ownership trusts).
  4. (4) For the purposes of subsection (2), the trustees바카라 사이트™ acquisition costs are 바카라 사이트”
    1. (a) the consideration for the disposal,
    2. (b) where some or all of the consideration for the disposal is deferred, so much of any interest payable in relation to the deferral as reflects a rate of interest not exceeding a reasonable commercial rate, and
    3. (c) any liability to stamp duty or stamp duty reserve tax on the acquisition of the ordinary share capital.바카라 사이트
  5. (2) The amendment made by this paragraph has effect in relation to distributions made on or after 30 October 2024.
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