Schedule 10 - Chargeable gains:
Finance Bill
12:45 pm
Mr Mark Hoban (Fareham, Conservative)
May I add to my hon. Friend's comments? In many respects, there is a world of difference between the circumstances of someone who has shares as a consequence of his or her employment and retires, choosing not to sell the shares but to enjoy their income, and someone who is no longer an employee of the firm but is required to hold on to the shares, or is forced to make a sale as a consequence of their employment being terminated. In private companies, there may be agreement that an employee must sell their shares if they resign from the firm. Clearly, if they take a while to reach agreement with the employer, some part of the gain may be taxed on the basis that the shares are non-business assets. There is an issue if a sale is forced on an employee.
There are other situations, perhaps as a consequence of a flotation, in which certain shareholders are locked in for a period. For employees at the time of flotation, the lock-in agreement is not lifted on their departure from the company. They may be forced to hold on to the shares for one or two years after they cease to be an employee. On the basis of current legislation, the shares are treated as business assets for the period as an employee, but are treated as a non-business asset and, as a consequence, incur a high capital gains tax charge for the period after they left employment, even though they cannot realise the shares until the lock-in agreement has expired.
The amendment addresses a series of anomalies in which people must account for a non-business asset gain. It is important that the Government recognise cases in which employees, through no fault of their own, must pay a high capital gains tax charge as a consequence of the distinction between non-business and business assets.