(Except clauses 3, 5, 6, 15, 21, 49, 90 and 117 and new clauses amending section 74 of the Finance Act 2003) - Schedule 2
Finance Bill
1:30 pm
Stewart Hosie (Spokesperson (Economy; Home Affairs; Treasury; Women); Dundee East, Scottish National Party)
It is a pleasure to see you in the Chair, Mr. Cook. Before we adjourned, I was describing the talk of winners and losers that had taken place in respect of capital gains tax changes and those who sold shares and were due to pay capital gains tax on them. One of the issues that has not been addressed before relates to people who hold share options. As I have said, those options might have been granted as bonuses or rewards for loyalty over time from a company. People might have intended to keep them and exercise them as options; to buy and sell when it was beneficial to them perhaps in large part to fund a special holiday or their retirement. I am not talking about rich people or those in senior management. I remember from my past when ordinary employees of a large plc were routinely granted share options as part of its loyalty and bonus payment system. However, in the case of a takeover, particularly of one plc by another plc, the options have to be crystallised to facilitate the sale or buy-out of the company. The holder of the options may not necessarily want to crystallise the options into shares, but has to as a result of a buy-out or takeover by another company. The employee is then left with an option. They may no longer be employed by the new company, but be surplus to requirements, or may not feel the same loyalty to the new company that they had to the old company, and consider that it was time to sell up. Again, I can think of ordinary workers from my background with that experience.
What consideration has the Treasury given to that particular group of people? I doubt whether it is a large group. With the market being what it is, there is not a lot of takeover activity. None the less, people might have options that are required to be crystallised when they otherwise would not have, but might then choose for a variety of reasons to sell them. They would be liable to capital gains tax under the new regime. I accept that my point is technical and that it has not been raised before, but I should be grateful to know whether the Minister intends to look at that group of people sympathetically or simply say that, once the options are crystallised and the shares are sold, capital gains tax will be paid as it would had the share been held as a share, not as an option.