A plan unveiled by Chancellor George Osborne at the Tory party conference to allow firms to offer staff between £2,000 and £50,000 of tax-free shares in exchange for giving up employee rights on dismissals, maternity leave and working hours has been broadly welcomed by business owners.
Under the plan, which has already been agreed with Vince Cable, the Liberal Democrat Business Secretary, the shares would be exempt from capital gains tax (CGT) when they were sold. And Treasury aides said the scheme would be open to businesses of any size, although Mr Osborne feels that it would particularly suit staff at fast-growing firms.
Aiming to fast-track the plan through Parliament for implementation in April next year, the Chancellor faces stiff opposition from Brussels, as staff would have to give up any claims to unfair dismissal, redundancy and flexible working in exchange for the shares, which breaches EU law.
To avoid such a breach, the proposed legislation would need to find a new remedy for claims that emanate out of EU law, meaning that a very significant change in employment law would be required, which could even lead to a situation whereby some employees were fully protected while others lost significant employment rights. However, the employees who took shares would have an increasing say in how the business was run.
The plan would also lose the Government around £100m in lost CGT revenues by 2017-18.
The proposal was one of a package of announcements made by the Chancellor yesterday. He also unveiled plans for £1bn funding for science in universities and said that the Treasury was consulting on a “generous new tax regime” to encourage development of the shale gas industry.