Employee Ownership Trusts

An Employee Ownership Trust lets you sell a controlling stake in your business to a trust that holds it for the benefit of all your employees — the John Lewis model, made accessible to owner-managed companies. You get a fair market price, paid over time from the profits of the business you built; your team gets ownership, continuity and tax-free bonuses.

The rules have tightened twice recently: reforms from October 2024 added new trustee and valuation conditions, and the Autumn Budget 2025 reduced the CGT relief from 100% to 50% for disposals on or after 26 November 2025. An EOT can still comfortably beat the tax outcome of a trade sale — but only if the structure, valuation and funding plan are right. That is what Acumon delivers.

What Is an Employee Ownership Trust?

An EOT is a trust that acquires and holds a controlling interest — more than 50% of the shares and voting rights — in a trading company, for the benefit of all its employees. The sellers agree a market-value price, typically receiving some cash at completion and the balance as deferred consideration funded from the company's future profits.

Day-to-day management usually stays exactly where it is: the board continues to run the company, while the trustees hold the shares and look after employees' interests. For owners without an obvious family or management successor, an EOT offers a full exit at market value without putting the business through a trade-sale process — no competitor gets access to your numbers, and your name stays over the door.

EOT Tax Reliefs in 2026/27

For disposals on or after 26 November 2025, sellers receive CGT relief on 50% of their gain. The remaining 50% is chargeable at normal CGT rates — 18% or 24% for 2026/27 — which works out at an effective rate of about 12% across the whole gain for a higher-rate taxpayer. That still undercuts Business Asset Disposal Relief at 18%, and unlike BADR there is no £1 million lifetime cap; note that you cannot claim BADR on the same disposal where EOT relief is claimed. The relieved half of the gain is held over rather than extinguished, and can come into charge if the trustees later sell the shares. Disposals completed before 26 November 2025 qualified for 100% relief.

Employees benefit too: an EOT-controlled company can pay each employee bonuses of up to £3,600 a year free of income tax (National Insurance still applies), and since the October 2024 reforms, directors can be excluded from the bonus arrangements if the company chooses.

Qualifying Conditions — Including the 2024 Reforms

The core conditions are long-standing: the company must be a trading company or the parent of a trading group; the trust must acquire and keep a controlling interest; the trust must benefit all eligible employees on the same terms (though amounts can vary by pay, hours and length of service); and the number of shareholder-participators and connected persons among the workforce must stay within statutory limits.

Reforms taking effect from 30 October 2024 added significant new requirements. The trustees must be UK resident. Former owners and persons connected with them must not control the trust after the sale. The trustees must take reasonable steps to ensure they pay no more than market value for the shares. And the clawback window was extended: if a disqualifying event occurs before the end of the fourth tax year following the tax year of disposal, the CGT relief is withdrawn from the sellers. These conditions make independent valuation and careful trustee design essential — a defect discovered years later lands the tax bill back on you.

How an EOT Sale Works

A well-run EOT transaction moves through five stages. First, feasibility: we test whether the company's cash generation can realistically fund the price, and compare the EOT outcome against a trade sale, an MBO and other succession routes. Second, valuation: an independent, evidence-based market valuation that the trustees can rely on — now a legal necessity, not a nicety. Third, structure: designing the trust, the trustee arrangements and the funding plan, including day-one cash and the deferred consideration profile. Fourth, clearance and completion: we apply to HMRC for advance clearance and work alongside your solicitors on the trust deed and sale documents. Fifth, life after the deal: bonus arrangements, trustee governance, accounts and ongoing compliance so the reliefs stay intact throughout the clawback period.

Is an EOT Right for You?

EOTs suit profitable, cash-generative companies with a capable management team and an owner who cares about legacy as much as headline price. They are less suitable if you need the full price in cash on day one, or if a strategic buyer would pay a premium far above market value. We will tell you straight which camp you are in — and if a different exit route serves you better, our wider succession planning and business sale teams can take it from there.

What You Get With Acumon

• Feasibility review comparing an EOT against a trade sale, MBO and other exit routes
• Independent, defensible valuation the trustees can rely on
• Transaction structuring, funding plans and HMRC clearance applications
• Coordination with solicitors on the trust deed and trustee arrangements
• Design of income-tax-free employee bonus arrangements of up to £3,600 a year
• Post-completion compliance and governance support through the four-year clawback period

Get a Fixed-Fee Quote

Tell us what you need and we'll come back within one business day with a clear scope and a fixed price — no hourly-rate surprises. Call 020 8567 3451 or use the form and we'll be in touch.