Employee Ownership Trusts
An Employee Ownership Trust (EOT) allows business owners to sell a controlling interest in their company to a trust for the benefit of their employees, with the sellers paying no Capital Gains Tax on the proceeds. It provides a meaningful, tax-efficient exit while preserving the business legacy and culture.
What are the benefits?
Zero Capital Gains Tax on the Sale
Sales of a controlling interest (more than 50%) to an EOT are exempt from Capital Gains Tax for the selling shareholders, regardless of the size of the gain. This can result in tax savings of hundreds of thousands of pounds compared to a traditional trade sale.
Tax-Free Bonuses for Employees
Once the business is owned by an EOT, the company can pay qualifying employees tax-free bonuses of up to £3,600 per year. This makes an EOT an effective retention and motivation tool as well as an exit vehicle.
Business Legacy and Continuity
An EOT sale typically allows the business to continue with its existing management and culture. It provides a meaningful succession solution where no family member or obvious buyer exists, and employees benefit directly from the business's future success.
Deferred Payment Structure
The purchase price is typically paid out of future company profits over several years, avoiding the need for third-party financing or a leveraged buyout. The sellers receive the agreed price over a defined period with commercial interest.
How can Zenus Tax help?
We advise on whether an EOT is the right exit route for your objectives and circumstances
We manage the process end-to-end: valuation, EOT structure, HMRC clearance, and legal documentation
We ensure the EOT meets all legislative requirements to qualify for the CGT exemption
We advise on the tax treatment of the deferred purchase price and ongoing management bonuses
Frequently Asked Questions
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