Editions by Evelyn Partners - Employee Ownership Trusts

In 2014, new tax reliefs were introduced to facilitate employee ownership. The Government introduced these reliefs because it considered that employee ownership would lead to greater employee engagement, higher productivity, and lower staff turnover.

The relief allows a capital gain tax ("CGT") free exit to be secured. With business asset disposal relief reduced to £1m, EOTs are important to consider as a potential exit strategy and succession plan. The possibility of a tax-free sale is intended to incentivise company owners to move their businesses into a structure for the benefit of their employees.

The Government has recently announced that a consultation will be held on the EOT tax legislation. The consultation document will be released later this year.

• The rules and how to qualify for a CGT-free sale
• How to determine whether the structure will be beneficial for your business
• The key advantages of becoming employee owned from a tax and commercial perspective
• The key challenges to becoming employee owned and where it may not be suitable
• The main cultural benefits and the overall governance framework
• Possible points for consideration in the Government consultation.

The recording will set out the rules and how the structure works in practice, and highlight some of the key advantages and practical issues facing businesses.

EOT structures can be used as form of business exit and therefore any business owners considering a management buy out, trade sale or listing should also consider an EOT alongside other options. EOTs may also be suitable for businesses looking for a cultural shift and family-owned businesses looking at succession planning. 

The structure may be beneficial for businesses who seek active employee engagement, cultural change and the next level of management to run the business.