A Quick Guide to Employee Ownership Trusts (EOTs)
Employee Ownership Trusts (EOTs) are an increasingly popular way for business owners to sell their company while protecting its long-term future. Introduced in the UK in its current form in 2014, an EOT enables employees to gain an indirect ownership stake through a trust that holds a controlling share of the business on their behalf.
In simple terms, instead of selling to an external buyer, the owner sells their shares to the trust. The trust then runs the company for the benefit of all employees, ensuring that the business stays independent and continues to operate in line with its values.
One of the main attractions of EOTs is their tax efficiency. Shareholders who sell a controlling stake (more than 50%) to an EOT can qualify for Capital Gains Tax (CGT) relief, meaning they only pay CGT on 50% of the gain on disposal. Meanwhile, employees can receive income tax‑free bonuses of up to £3,600 per year, subject to conditions.
Beyond tax benefits, EOTs can strengthen company culture. Because the business is owned collectively, employees often feel more engaged, motivated, and aligned with long-term success. This model is particularly appealing for business owners who want to preserve their legacy and avoid private equity or trade sales that may change the company’s direction or culture.
However, EOTs are not a one-size-fits-all solution. They require careful planning, the right governance structure, and a sustainable financial model to fund the share purchase over time. Importantly, trustees must balance the interests of employees with the commercial needs of the business.
As more companies explore succession planning options, EOTs are emerging as a compelling alternative, blending financial reward with shared ownership and a focus on long-term resilience.
To discuss how an Employee Ownership Trust could support your succession planning, please contact our team.