The Fizz! Blog

Three reasons why the "shares for employment rights" plan is ridiculous

Yesterday George Osborne announced proposals for employees to be given shares in their employer, in return for giving up a substantial portion of their employment rights.  I could come up with many more reasons why it's a plan so ridiculous that it's surreal, but here's three to be going on with.

1. What on earth have employment rights and share ownership got to do with each other?  Nothing at all.  Why link them in this way?  Presumably because the Conservatives want to restrict employment rights and the LibDems want to encourage share ownership, and so they've come up with this surreal hybrid policy.  But it's a bit like introducing a law that says you can use more force with burglars in your home, but in return you can't claim relief for pension contributions of more than £25,000 a year.  What have those two things got to with each other?  Nothing.  Exactly.
2. The boast is that the owner of the shares won't have to pay Capital Gains Tax on them.  But you don't pay CGT on sales of shares in any case until you make more than £10,000 of profits on shares and the like in a tax year.  If your employer gives you £2,000 worth of shares in their company, are you likely to sell them for more than £12,000?  It's possible but unlikely.  In large part, the CGT part of this is just something that the government knows is of minimal cost but sounds impressive.
3. In any case, who are you going to sell the shares to, even if you want to?  A tiny parcel of shares in a small limited company will be of minimal worth to anybody - even if they are dividend paying, there's no guarantee that will continue into the future.  Finding a third party to buy them is likely to be tricky to impossible.

With plenty of sensible things the government could do that people *are* asking for, introducing things like this that nobody seems to want at all is just bizarre.

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The Seed Enterprise Investment Scheme - an opportunity for crowdfunders and gamblers!

The Seed Enterprise Investment Scheme (SEIS) started on 6 April this year.  Its aim is to encourage people to invest in small businesses.  In broad terms, if you subscribe for shares in a small company - but own less than 30% - then a) you get 50% income tax relief on the cost of the shares, so that - say - a £5,000 investment could only cost you £2,500 and b) can also, for this tax year, avoid paying capital gains tax if you've got taxable gains of an equivalent amount to your investment.  Overall, the idea is you get 50% tax relief always, and could get 68% or 78% this year if you've got a potential capital gains tax bill.

So far, so good.  The problem is, where do you find a company to invest in?  It can't be your own company (you'll probably own more than 30% already) and you might not know of any other small businesses that need money or are open to taking it from you.  So it might be hard to find a suitable home for your money.

However, crowdfunding could provide you with an opportunity.  In basic terms, crowdfunding involves a business seeking investment advertising that fact on the web, with an aim of attracting smallish investments from a large number of people.  Have a look at crowdcube.com for an example - you'll see there are plenty of companies there looking for investment.

Since the SEIS began, many of these companies have cottoned on to it and are using it to add to their appeal - if your investment's effectively half-price, why not take a gamble?  We're not suggesting you should do it, as it's pretty likely your investment will be worth nothing in the end, and as a minority shareholder in an unlisted company you've not really got much in the way of leverage if you're not happy with the way the company's being run.  But it could just take off, and it may be that you actually know something of the business owner and feel you've got some inside information that make it a better than average bet.

Anyway, don't throw £10,000 away in order to save £5,000 (or even £7,800) of tax - but do be aware of SEIS.  It could be a brilliant bonus if you think you've found an investment prospect that's good in any case.

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Considering buying a zero or low emission company car? Think ahead

Usually, company cars aren't a very tax-efficient way to go if you run your own company, as the tax you pay on the privilege personally will generally outweigh the tax your company saves.  For the last few years, an exception has been on zero-emission (i.e. electric) and low-emission vehicles - if you have a company car that qualifies under the rules, you don't have to pay any tax personally at all, making them a very attractive prospect.

However, that incentive is scheduled to finish in April 2015 - from that point, tax is going to be payable by the user of the car, as things stand - at a lower level than on a "normal" small car, but not much lower.  It doesn't make a difference immediately, but if you're thinking of buying such a vehicle for use as a company car, and you're planning to keep it for more than two and a half years, you should definitely be aware of the proposed change and think about whether a zero/low-emission car will be quite as attractive in a couple of years as it is now.

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Minimum wage goes up today!

The minimum wage increases as of today:

The adult rate goes up to £6.19.

The apprentice rate goes up to £2.65.

The rates for 16-17 year olds and 18-20 year olds stay the same for some reason.

If you've apprentices or grown ups on the minimum wage don't forget to increase their rate.

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