Employee Ownership Trusts

Introduced in 2014, Employee Ownership Trusts are becoming increasingly popular both as an employee incentive and as a tax efficient exit route.

EOTs can give business owners looking for an exit strategy an opportunity to sell their shares to an employee-owned trust free from Capital Gains Tax whilst rewarding their team.

How do EOTs work?

Employees do not directly own shares. These are transferred to a trust that later benefits employees.

The existing shareholder(s) must sell at least 51 per cent of the share capital of the company to the EOT.

If some of the consideration is deferred, then this is usually paid out of the future profits of the company.

Since the introduction of the scheme, the disposals of shares via EOTs have been exempt from Capital Gains Tax, which allows the owners to get the most value from what they have invested in the business.

Divestiture of these shares will also be exempt from any potential Inheritance Tax bill, ensuring more wealth is passed to beneficiaries.

Tax-free bonuses of up to £3,600 to employees can be made available, free of income tax, but not National Insurance, whilst your business will benefit through a Corporation Tax deduction for the value of the bonuses.

If you are considering transferring your business to an EOT, our expert team can provide advice and practical support.

Speak to a member of our team today!

Call 01752 664377

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