§ Mr. Forman
asked the Chancellor of the Exchequer if he has received representations about relaxing the conditions for relief, under section 24 of the Finance Act 1983, for interest paid on loans taken out by employees to buy shares in an employee-owned company as part of an employee buy-out; and if he will make a statement.
§ Mr. Moore
We have been considering a number of representations on this matter and have decided to relax the conditions for relief in the following ways:
- 1. For the purposes of determining whether a company is employee controlled, the present requirement is that the
318 employees own at least 75 per cent. of the company's ordinary shares and voting power. This percentage test is to be reduced to "over 50 per cent".
- 2. Under the present rules, where an individual holds more than 5 per cent. of the shares or voting power, the excess is to be left out of account in considering whether the employee control test is satisfied. This percentage is to be raised to 10 per cent, and where husband and wife are both full-time employees the 10 per cent. and where husband and wife are both full-time employees the 10 per cent. limit is to apply separately to each spouse.
The necessary legislation will be brought forward in the 1984 Finance Bill, and we propose that the changes should take effect from 6 April 1983, so that interest paid on or after that date will qualify for relief where the relevant conditions are met.