Employee Ownership Trusts

An Employee Ownership Trust (otherwise known as an ‘EOT’) is an innovative and tax efficient way to sell your business to your employees.

Not only are Ison Harrison Solicitors experts in advising on becoming an EOT, Ison Harrison Solicitors are 100% owned by their employees in an Employee Ownership Trust. Ison Harrison are therefore ideally placed to advise business owners on both the legal and practical issues arising when considering becoming an EOT.

Becoming an EOT enables a business owner (‘the Seller’) to sell their shares in a business to a trust created for the benefit of the employees. The EOT will become the owner of the business and will be ran for the benefit of the employees.

The legislation and legal process about becoming an EOT is complex but there are significant benefits to the Sellers and the employees as follows:

• A Seller can sell their interest in the Company without any liability to pay any Capital Gains Tax, subject to compliance with s236H of the Taxation of Chargeable gains Act 1992;
• Employees obtain a share in the Company without having to invest large sums of money;
• Employees can benefit from up to £3,600 per annum tax free income on any profit share. Any profit share above this level is taxed at income tax rates;
• Businesses can be sold to the EOT in a manner which avoids the need for bank borrowing to fund the sale;

Many Companies who become Employee-Owner often report significant growth after completion as employees directly benefit in the growth of the Company.

This is a tax-efficient structure which creates significant tax savings for both the business owner and the employees.

Structures can also be created in conjunction with an Employee-Ownership Trust to retain key members of management or in conjunction with other share schemes.

A Seller will often require both legal advice and advice on taxation. Ison Harrison Solicitors can recommend tax advisors to work with as appropriate.

If you would like to discuss this further, please contact our Director and Head of Corporate & Commercial, Richard Coulthard on 0113 284  5095 or via email at richard.coulthard@isonharrison.co.uk Richard was directly involved in the implementation of the Ison Harrison EOT Scheme and can talk personally about the process and practical considerations.