UHY Ross Brooke Chartered Accountants

Structuring an EOT

What are Employment Ownership Trusts?

Quite simply, an Employee Ownership Trust (EOT) is where the employees of a company indirectly own and control the business through a trust. A well-known example of this is the John Lewis Partnership model.

Who uses an EOT?

Owners of a company who wish to sell their business in a tax-efficient manner and who also want to pass the business on to their employees to safeguard their jobs, the legacy and heritage of the company may choose to create an Employee Ownership Trust.

Benefits of Employee Ownership Trusts

  • EOTs are very advantageous from a tax perspective for both the owner and the employees. The owner could end up paying 0% capital gains tax on the sale, while realizing the full market value, and the employees can receive an annual bonus of which the first £3600 is tax free.
  • Owners and employees continue to benefit from the feelgood factor and goodwill they have built up together over the years.
  • Owners may continue their involvement in the business, with a smooth transition period.
  • Owners can rest-assured in the knowledge that their business will continue as they would wish it to, and not be asset stripped or subsumed into a competitor’s company.
  • The sale process is generally quicker and attracts lower selling fees.

Do you need an EOT specialist?

Setting up an Employee Ownership Trust is not straightforward and a thorough knowledge of the rules is required. Your existing company accountant or solicitor may not have the expertise. The good news is that we’ve set up Employee Ownership Trusts for several of our clients, and are happy to advise and support you too.

The process for setting up an EOT

  • Ask your existing company accountants, or UHY Ross Brooke to undertake an independent valuation of the business.
  • Decide how much of the business you wish to retain. This will affect your tax liability.
  • Apply to HMRC for tax clearance (your accountant can do this for you).
  • Appoint solicitors to prepare the trust deed and the share purchase agreement.

How does an EOT work?

  • Establish an EOT with the company as the trustee of the EOT
  • Shareholders sell their shares to the Trust. The price is based on the independent valuation of the company. This creates a debt owed to the shareholders.
  • Profits are transferred to the EOT which are then repaid to the shareholders over a period of time.

employee ownership trust EOT guideEOT guide download

Are you looking for a tax efficient way of passing your business on? Our useful guide will help answer any questions you have. Download our EOT guide.

Next steps

Need a little more clarification? Get in touch with our Employment Ownership Trust specialists to understand how an EOT could be the best solution for your business exit strategy.

Find out more about an EOT:
Watch our video 

What our clients say

If we did not convince you, maybe a few words from our customers will!

Great service from all the team at UHY Ross-Brooke! Always very professional and courteous, it’s a real pleasure to deal with this firm. Phil Kinzett-Evans is extremely knowledgeable and was instrumental in the completion of my EOT. Tracey and Daisy have been a great help through the years with all my tax and vat affairs.

David Klein

5/5

From an ex-client who wishes to reappoint UHY Ross Brooke: “We have been with a different firm, and my “designated” accountant has changed a couple of times; frankly I have little faith in them. I had been lulled into a sense that it was almost a done deal. But I enjoyed our dealings [with David Jones of UHY Ross Brooke], and trust your calm level headed approach”

Returning Client

5/5

I was nervous about setting up my own company but Chris explained everything in easy terms and it was a painless undertaking. Throughout the five years as a client every transaction was painless and efficient, and always a helpful explanation or response just a phone call or e-mail away. I can highly recommend Ross-Brooke, as indeed they were recommended to me. If you’re seeking a great accountant, these are they.

Phil C

5/5

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