Financial & Legal News

MPs overrule Lords on Employee Shareholders

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The Government has defeated the Lords to reintroduce the controversial ‘shares for rights’ after a vote at the House of Commons.

The vote to reintroduces clause 27, the employee shareholder proposal, of the Growth and Infrastructure Bill, creating a new 'Employee Shareholder' status.  The House of Lords voted overwhelmingly last month to remove the clause, which offers employees a share in their company in exchange for certain employment rights.

Shares in their employer worth at least £2,000 will be exchanged for giving up a number of employment rights including 'ordinary' unfair dismissal and the right to a statutory redundancy payment.

The Lords had objected clause 27 as a ‘bully's charter’ allowing employers to purchase historically inalienable employment rights.

Commenting on the results of the vote today, TUC General Secretary Frances O’Grady, said:

“This proposal should have been quietly killed off today. It has no support among employers and was heavily defeated in the House of Lords by a wide coalition including prominent Conservative and Liberal Democrat peers.”

The first £2,000 of shares will be free of income tax for employees, and they would not pay capital gains tax on the first £50,000. Details of how the shares will be valued on buy-back or sale is awaited in subsidiary Regulations, not yet published.

Frances O’Grady, added: “Employment rights should not be for sale. Employers do not want to buy them, and employees will not want to sell them. What is worse is that it's only real practical use is as a tax dodge. We will continue to lobby peers to defeat this proposal again in the next round of parliamentary ping-pong.”

The Bill will now be returned to the House of Lords on 22 April where the fate of Clause 27 will once again be debated by peers.


Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

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