Employee Ownership Trusts

A ‘John Lewis’ style all employee trust, with zero CGT for sellers

In 2014, the government introduced legislation to promote the transition to an employee ownership model for companies throughout the UK.

Since then, employee ownership has become an increasingly popular exit route for business owners.

Although the tax reliefs of Employee Ownership Trusts (“EOT”) are attractive, there are a number of things that should be considered by those looking to sell their business.

What is an Employee Ownership Trust?

An Employee Ownership Trust (EOT) is an indirect form of employee ownership, in which a trust holds a controlling stake in a company on behalf of all its employees, and incentivises owners to sell a controlling stake in their business.

The EOT becomes the owner of the company and is administered by trustees on behalf of the employees.

An EOT is often considered because it is a tax-efficient exit strategy for shareholders wanting to sell.

Key features

• Trust holds all or majority of company shares on behalf of all employees
• Most tax efficient exit route available, because sellers to an EOT pay zero Capital Gains Tax
• Annual income tax free bonuses of up to £3,600 per employee possible
• Sellers can sell, crystallise gain, claim relief and be paid on deferred terms
• Sellers can step back from the business at their own pace

How we can help

Langdowns DFK is experienced and qualified to advise on whether an EOT transaction is right for you and your business.

We can advise and manage the entire process:

• Review, analyse and understand sellers’ objectives and expectations and provide Feasibility Analysis, including financial modelling.
• Arrange, structure and negotiate commercial financing for the transaction.
• Project manage entire transaction, combining financing, legal processes and documentation, valuation, tax clearances and establishment of trust, minimising execution risk on the project.
• Provide additional advice and support for the EOT trustees if required.

For more information about Employee Ownership Trusts and the tax advantages, click the link below. 

Employee Ownership Trusts: A summary

Alternatively, complete the contact form below or call our team on 023 8061 3000.

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