The measure will take effect from midnight tonight, and is expected to bring in £10m of extra tax in 2019/20, rising to £35m in 2020/21.

The measure will have effect in relation to employee shareholder shares acquired in consideration of an employee shareholder agreement entered into from midnight at the end of 16 March 2016, and to gains on such shares.

When employee shareholder shares issued as consideration for entering into employee shareholder agreements from midnight at the end of 16 March 2016 are disposed of, gains made in excess of the lifetime limit will be chargeable to CGT.  Previously there was no limit on gains.

Any past or future gains, realised or unrealised, on employee shareholder shares that were issued in respect of employee shareholder agreements made before the midnight deadline will not count towards the limit.

For transfers of employee shareholder shares between spouses or civil partners, the transfer will be treated as being for consideration which gives rise to a gain equal to the transferor’s unused lifetime limit, subject to the over-riding condition that the consideration does not exceed the market value of the shares transferred. This amount will fix the acquisition cost in the hands of the spouse.

Genevieve Moore, partner at Blick Rothenberg, said: ‘Proposed changes to Employee Shareholder Status tax regime are a concern, given that this tax efficient arrangement was pushed to encourage employee share ownership. 

‘The arrangement was generous offering a complete exemption from tax on sale of these shares in most circumstances – looks like this will now be capped in the future.  Question is whether people who already own these shares will be caught by the new rules.’

HMRC’s policy paper Capital Gains Tax: lifetime limit on Employee Shareholder Status exemption is here