Since they were first introduced in 2014, Employee Ownership Trusts (“EOT”) have become an increasingly popular alternative form of exit to a traditional trade sale or management buyout. The transaction entails the departing shareholders selling their shares in a company to a trust which holds the shares on behalf of the company’s employees.

With limited disruption to the day to day operations, an EOT facilitates not only a smooth handover of the business and a safeguarding of jobs, but also enables business owners to achieve a highly tax efficient exit strategy.

With future increases in capital gains tax likely and keen to secure the long-term future of the business, owner managers are increasingly viewing EOTs as an attractive option for a future disposal.

Key benefits to both the business and the employees, if the conditions set by HMRC are met include:

  • Improved business performance and higher levels of employee engagement.
  • Potential rewards to employees of income tax-free bonuses of up to £3,600 p.a.
  • Employee participation in the future capital growth and success of the company.
  • Preservation of the company’s culture and strong core values.

Due to the alignment of company and employee interests, EOTs have been shown to lead to a real drive for innovation and improved business performance as a result of higher levels of employee engagement and retention.

Cottons Corporate Finance is here to help you

With a wealth of expertise in this area, we are ideally placed to advise you on how to best structure the deal to meet HMRC conditions.

At every step of the transaction, our friendly and expert approach will advise you not only on the technical aspects of the transaction but also on managing key stakeholder relationships. We will guide you in positively engaging with the senior management team and employees throughout the process.

It’s important to protect a company’s future. So let’s recognise employee contribution, let’s drive tax efficiency, let’s talk EOT.