Employee Ownership Trusts surge as entrepreneurs seek tax-friendly exits
The number of UK businesses transferring ownership to employees through Employee Ownership Trusts (EOTs) has surged as business owners seek tax-efficient exits.
New research by Lubbock Fine accountancy firm shows EOTs, which allow entrepreneurs to sell their shares to employees via a trust, reached 542 last year, up 27 per cent – the highest annual figure since the EOT model was introduced in 2014.
Over the past five years, the number of new EOTs has skyrocketed by 2,750 per cent, with many entrepreneurs favouring the tax-efficient structure.
Owners selling into trusts don’t have to pay capital gains tax (CGT) or worry about inheritance tax liabilities.
In addition, EOTs can pay annual bonuses to their employees free of income tax.
Mark Turner, a partner at Lubbock Fine, explained the shift: “The number of new EOTs has ballooned in recent years – many businesses obviously see EOTs as a very attractive option”.
He noted that EOTs are becoming the preferred choice for business owners seeking to exit while preserving company culture and rewarding loyal employees.
“Upcoming changes in the Labour budget may further boost interest in EOTs if CGT is increased, making private equity buyouts,” Turner added.