Employee ownership trusts

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An employee ownership trust (EOT) is a type of employee benefit trust. Its purpose is to hold the shares of a company, enabling a company to become owned by its employees.

According to the Employee Ownership Association employee ownership delivers c.4% of UK GDP annually. The UK’s 50 largest employee-owned companies had combined sales of £21.7bn in 2022 and ranged from The John Lewis Partnership Plc to the Arup Group to the Unipart Group of Companies Ltd.

An EOT can be set up by a company’s existing owners and can be highly attractive option whether you are a new start-up or the owner of an established business considering your exit strategy. It provides a great alternative for those looking to sell their business, especially where there may not be many trade buyers in the market.

What are the tax incentives and advantages of selling to an EOT?

If key qualifying conditions are met, the following tax benefits are available:

  • complete CGT exemption
  • income tax free bonuses of up to £3,600 p.a. may be paid to each employee.

What are the commercial advantages of selling to an EOT?

  • It allows employees to indirectly buy the company from its owners without requiring them to have their own funds.
  • Shareholders can realise full market value for their shares.
  • Not all shareholders need to sell their shares for the tax advantages to be secured.
  • Exiting shareholders who are also directors can remain in place and can continue to receive market value remuneration.
  • A swifter sale process.
  • A committed workforce.

What do we do?

We advise business owners on how to use Employee Ownership Trusts effectively to achieve a variety of outcomes from exit and succession planning to employee engagement. Our in-depth experience and understanding of EOTs provides you with the assurance that you are dealing with advisers who can guide you through the process, making the transition as seamless and stress-free as possible.

Got a question? Get in touch.