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Employee Ownership Trusts (EOTs) are an increasingly common exit strategy for owner-managed businesses, providing a tax efficient route for business owners to realise the value of their shareholdings while benefiting their employees and safeguarding the future of the business.
Our specialists have advised businesses of varying sizes on their transition to employee ownership, as well as supporting the seller of Employee Ownership Trusts. As a result, we have experience of the full range of challenges and opportunities that employee ownership involves.
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Our services
How we can help you:
We make it simple for directors trustees and trust companies to ensure compliane with legislative requirements and tax implications.
Business owners want to protect their legacy, our experts will ensure a sale at fair vlaue that includes a smooth transfer of ownership that retains the culture of the company.
The first step is exploring if employee ownership will work for you business. We can help you make that call and then guide you through the transition if it's right for your business.
What to expect from us
The right legal experts, wherever you are.
Regional teams, nationally connected – we move quickly, stay close, and bring the right specialists together around you.
When it matters most, you need experience in the room. Our structure gives senior advisers more time with clients. So relationships are built over years, not handed off after day one.
Our specialists in your region are backed by a nationwide network. So, whatever comes up, you get the right experts without having to change advisers.
We’re based in the regions where you operate. So you work with advisers who understand you and are there in person when you need them.
Employee Ownership Trusts
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FAQs
Common questions about Employee Ownership Trusts
An Employee Ownership Trust (EOT) is a specific type of trust which enables a company to become owned by its employees.
EOTs act as a form of indirect employee ownership. This means that, rather than the employees directly owning shares in the company, the shares are owned by the trust, of which the employees are the beneficiaries.
They have their origin in a political desire to introduce more diversity and engagement into the UK economy by encouraging employee ownership. This led to the Finance Act 2014 which introduced certain tax reliefs relating to companies owned by an EOT as well as to individuals who sell a controlling interest to an EOT.
There are now over 2,000 EOTs in the UK and this number is growing every year.
For an Employee Ownership Trust to be established the existing owners of the company need to sell a controlling interest to the trust.
The owners would be paid for their shareholding at the market value, typically on deferred terms over a number of years.
Once the previous owners have been paid in full, the employees of the business are then able to benefit from the profits of the business, which would otherwise normally only benefit a small number of shareholders.
There are three main tax benefits to an Employee Ownership Trust (EOT):
- Capital gains tax relief for the existing owners disposing of their shares.
- A limited exemption from income tax on bonus payments of up to £3,600 per year paid to employees by companies owned by EOTs.
- Relief from inheritance tax on certain transfers into and from EOTs.
To secure these tax benefits there are various conditions that must be met. These will need careful consideration as part of any EOT transaction.
An Employee Ownership Trust is most suitable where:
- There is confidence that employee ownership dynamics will be a good fit.
- Employee engagement is high.
- There is strong internal management and opportunities for succession amongst the existing workforce.
- Other exit routes (such as a third-party sale or an IPO) are not considered to be viable or in the best interest of the business or its employees.
When considering a sale to an EOT there are various issues that will need to be considered, both from a legal and tax perspective.
For example:
- what will be the governance structure of the company and the EOT?
- what is the market value of the shares that the trustee will acquire and how is the consideration to be structured?
- will any external funding be sought to help finance the transaction?