Imagine this scenario. You have spent years, decades, ever, building your business.
It is your life’s work, your team feels like family, and you want to see it thrive even after you step away.
So, what are your options?
- Selling to a competitor? That could mean layoffs or a total culture shift.
- A management buyout (MBO)? Great in theory, but what if the numbers do not add up?
Here is where Employee Ownership Trusts (EOTs) come in.
What is an EOT?
An EOT lets you sell your business to your employees through a trust that holds a controlling interest (at least 51 per cent).
Instead of a single buyer taking over, your team continues running the company while benefiting from its success.
It is a win-win. You secure a fair price, your employees gain stability, and your business’s legacy stays intact.
Why business owners love EOTs
- No Capital Gains Tax (CGT) – Unlike a trade sale, selling to an EOT is 100 per cent tax-free.
- No buyer needed – Say goodbye to the stress of finding an external buyer.
- Stronger employee commitment – Employees in EOT-owned companies can receive tax-free bonuses of up to £3,600 per year.
- Smooth transition – You can step back at your own pace rather than making an abrupt exit.
What is changing with EOTs?
The Government is tweaking the tax rules.
Under the new Finance Bill, certain costs involved in setting up an EOT like interest payments on loans and legal fees, will now be deducted for tax purposes.
It is a small but important update that clarifies how these transactions are taxed.
Is an EOT right for you?
If your business is profitable and has a strong team, an EOT could be the perfect way to secure its future.
However, if you need immediate full payment for your shares, an EOT might not be the best fit since these deals are usually financed over time.
Selling a business is a big decision, but you do not have to manage it alone.
Speak to us today to discuss whether an EOT is the right move for you.
