Clause 30
Finance Bill
10:45 am
Angela Eagle (Parliamentary Secretary, HM Treasury; Wallasey, Labour)
To put the discussion in context, the enterprise management incentives are intended to help smaller, higher-risk companies recruit and retain staff by allowing them to issue share options with tax advantages to employees. Provided that the conditions of the legislation are met, any gains from EMI share options are free from income tax and national insurance contributions, and that is the context of this debate. The hon. Gentleman asked a couple of questions about the changes set out in clause 30. He was right to point out that we have introduced a limit of 250 employees as a definition for those companies that will be eligible for the scheme. He asked why the figure is 250. It comes from the requirement that the Commission has laid down, because it is within the European Union’s definition of a small and medium-sized enterprise. As part of our ongoing discussions for state aid approval, that is what the Commission has suggested we base the figure on.
The national employers skills survey consistently finds that skills shortages in the labour market are most severe among companies with fewer than 250 employees, so there is an evidence base there. There is also the potential for market failure, with regard to the ability of companies of that size to attract appropriate staff to help them grow and expand, and that adds to the evidence base for the 250 figure. We have no other evidence to present to the Commission in favour of a different limit, which is why we have settled on the limit that it suggested. It has always been our intention, since the introduction of EMI, to target small and medium-sized enterprises. To that extent, I hope that I have given the hon. Gentleman the justification for what might have seemed, initially at least, to be an arbitrary figure. It is actually based on EU definitions and our own evidence base of skills shortages.