Joy at George Osborne tax change turns to dismay A 5pc minimum shareholding requirement for entrepreneurs' relief from capital gains tax - which offers a rate of 10pc instead of the 28pc rate on the sale of qualifying shares - has been criticised because it means staff with small shareholdings can be taxed on any gains at a much higher rate than the founder. Jonathan Straight, founder of AIM-listed recycling products business Straight Plc, asked the Chancellor to remove the "inequality" at last year's Telegraph Festival of Business. "It is not just the owner of a business who makes it successful and the tax regime has to date only favoured the owners," he said. When he saw a new rule in last month's budget which allows members of Enterprise Management Incentives (EMI) share option schemes to qualify for entrepreneurs' relief even if they do not hold 5pc, it initially "looked a good result." Mr Straight, who says most of his staff are in an EMI scheme, even wrote a letter to Mr Osborne to thank him for listening: "There was plenty I didn't like, but any victory is worth celebrating." However, details of the proposals published on HM Revenue & Customs' website last week left Mr Straight frustrated. Staff have to turn their options into shares and hold them for a year before they can qualify. I've no idea why they would do this as EMI options have to be held for three years anyway. Mr Straight also notes that those staff in the scheme without access to cash to take up options will still be penalised. Those that want to exercise their share options through EMI buy the shares at the option price. If they don't have the cash to do this, they have to sell some of the shares once the option is exercised in order to fund the purchase. These will still be taxed at the higher CGT rate. I think I need to write to Mr Osborne again for not thinking this through properly.