Should you hand over your business to the team who helped build it and how can you do it wisely?

Imagine stepping back from your business not by selling to a faceless conglomerate or a rival with different values. Rather, by handing it to the very people who’ve helped you build it.

That’s what an Employee Ownership Trust (EOT) offers:

A structured exit. A lasting legacy. A business still rooted in the soil it grew from.

EOTs have been quietly transforming British business. And while the government’s 2023 review remains unfinished, the fundamentals still hold strong.

This post explains how they work, what to watch out for, and how to decide if this route is right for you and for them.

What is an EOT, Really?

An Employee Ownership Trust is a legal structure that allows you to sell your company, gradually, to a trust that benefits your employees.

They don’t pay out of pocket.

You get tax advantages.

The business keeps running.

And no one needs to pretend it was all about the bottom line.

The Benefits (for Both Sides)

🧭 For Business Owners

Capital Gains Tax? Gone. Sell your shares to the EOT and pay zero CGT.

Flexible Exit. Step away fully or stay on as director — your pace, your choice.

Estate Planning Advantage. If the business is moved into the EOT, no inheritance tax. Ever.

🧑‍🤝‍🧑 For Employees

Shared Success. They’re not just staff. They’re co-owners (indirectly).

Tax-Free Bonuses. Up to £3,600 each, per year, income tax-free.

Stronger Culture. Ownership aligns hearts as well as interests.

How It Works (Without the Jargon)

You set up the trust.

Sell your shares to the trust. Price is agreed via an independent valuation.

The trust owes you. Future profits repay you over time.

But there are golden rules. Break them, and the tax perks vanish:

Your business must be trading (no holding companies).

The trust must own more than 50% of shares, profits, and votes.

Benefits must be broadly equal — though some variation for salary, hours, or length of service is allowed.

EOT vs. EBT — What’s the Difference?

They sound similar, but they’re built for different missions:

EBT (Employee Benefit Trust): Broader, more flexible, often used for share schemes or executive bonuses.

EOT (Employee Ownership Trust): Tighter, more focused, with powerful tax incentives, with stricter rules.

Think of an EBT as a toolkit.

An EOT is a succession strategy.

What Could Change Soon?

While major reform looks unlikely, the government’s review may bring tweaks:

🛑 No offshore trustees. A crackdown on capital gains tax avoidance post-sale.

🗳️ More employee voice. Stronger rules on governance and participation.

🧾 Tax-free bonuses limited to employees — excluding directors.

Most of these make sense. But if you're planning an EOT with offshore elements, watch this space closely.

Frequently Asked Questions

Q: Do employees pay anything for the company?

No. The trust pays the former owner over time using future profits.

Q: Can I keep a shareholding or board seat?

Yes, partial sales are possible, and you can stay on as a director if desired.

Q: What if business performance dips?

That’s the risk. Your repayment depends on future trading success so build in buffers.

Q: Can family members still be involved?

Absolutely. As long as benefits are distributed fairly among employees, family involvement is fine.

Q: Can I get paid upfront?

Not entirely. EOTs repay gradually, but bank financing can help bridge the gap in some cases.

Plan boldly. Exit wisely. Leave a legacy that lasts.

🔹 Start with a conversation rather than a contract.

🔹 Bring in an EOT specialist early to check eligibility and options.

🔹 Don’t treat succession as a sale. Treat it as continuity, with purpose.

Because this isn’t just about money.

It’s about honouring what you’ve built and giving others the tools to carry it forward.

If you’d like help navigating your options or need a quiet sounding board before approaching advisors feel free to get in touch.