Tax Implications of Owner – Employee Contracts

From April 2013 limited companies have the chance to offer owner-employee contracts. This is aimed at trading employee rights for tax breaks. So what are the implications for your business?

Owner-employee contracts are normal employment contracts, but with some of the statutory employee rights removed. Some of the removed rights here are unfair dismissal, redundancy or apply for flexible working. They will also require mothers to provide more notice (16 weeks) if they intend to return to work after a maternity break. In exchange, what these contracts offer for employees for forfeiting their rights are an opportunity to own between £2,000 and £50,000 worth of shares in their company. Any gain made by the employee when selling or transferring these will be tax-exempt.

However, as always there are tricky issues that will need to be sorted out before the scheme comes into force. For example, share valuation will need to be simple and fast At the moment, it’s extremely slow and difficult and also one needs to look at as to what will happen to the shares when an employee leaves?

So there’s lot of tax planning to be done when deciding of such contracts. For tax, accounting and bookkeeping advice, contact KVS Accountants. KVS act as bookkeepers in Fulham, Barnes, Putney, Wandsworth, Wimbledon, Kensington, Chelsea and Earlsfield.


Tags: , , , , , , ,