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Succession planning ― employee ownership trusts (EOTs)


Produced by Tolley in association with
Owner-Managed Businesses
Guidance
tag-icon Autumn Budget 2024

Succession planning ― employee ownership trusts (EOTs)


Produced by Tolley in association with
Owner-Managed Businesses
Guidance
tag-icon Autumn Budget 2024
imgtext

Employee ownership trusts (EOTs) ― the basics

An EOT is a discretionary trust that acquires and then hold a controlling interest in a company for the benefit of its employees. Sales of shares to EOTs are most commonly funded using future trading profits of the company or group. It is also possible to use bank borrowing to finance part of the purchase consideration. Interest can be charged on purchase consideration to the extent it is not paid up front. In addition, selling shareholders can take an arm's length salary for any work they will do as directors or employees after the sale.

Once the consideration has been paid in full, further profits of the business or gains realised on a future exit can be paid to the EOT and distributed to or otherwise applied for the benefit of employees.

Where a controlling interest in a trading company is sold to an employee ownership trust EOT and the necessary qualifying conditions are met, the sale of the shares of

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Craig Simpson
Craig Simpson

Tax Partner and Owner at Bates Weston Tax LLP , Corporate Tax, OMB, IHT Trusts and Estates

Craig Simpson is a Tax Partner and owner of Bates Weston Tax LLP and Bates Weston Tax Advisory Limited. He specialises in providing tax advice to privately owned companies and high net worth families.Craig set up his own advisory practice back in 2016 having held a number of senior positions in the national accountancy firms, seeing a gap in the market for a high quality, service focused advisory business. Advising across the range of tax matters relevant to the owner managed business. Craig particularly enjoys advising on complex reorganisations and reconstructions and developed a specialism in this area.Craig regularly writes in the tax press and presents to fellow professionals and clients. Craig is also the author of Tolley’s Tax Planning for OMBs and consultant editor for the OMB module on TolleyGuidance.

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  • 03 Feb 2025 07:10

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