Employee Ownership Trusts
How to create an Employee Ownership Trust (EOT)
An Employee Ownership Trust (EOT) is a consistently effective way to fuel the success of your company by passing some or all of the ownership over to it's most important asset - it's people.
As well as the tax free bonuses, staff with a say in how a business is run are more loyal, work harder and sick less.
It is a win win, which is why Loucas know the difference EOT’s make to the culture and success of companies that set one up.
What is an EOT?
- Employee ownership trusts are a method of ownership where the company’s employees hold a controlling state via a trust.
- Whilst the UK government has encouraged EOT’s since 2014, employee ownership is a well established model. For example, the trust created by John Lewis Partnership was created in 1929.
- An EOT is a very tax efficient way to sell your business. So long as the EOT acquires more than 50% of the shares then you will pay zero capital gains tax.
- The reasons you choose to create an EOT scheme are personal. It could be to pay less tax on your business sale or it could be to ensure continuity in the business for the employees and customers.
The benefits of an EOT
The popularity of EOT's is rapidly increasing. In June 2022 the total number in the UK reached 1,030. As well as offering a smooth succession plan for busines owners, the performance of employee owned businesses is highly attractive.
Employee owned businesses are seen to have higher productivity, greater levels of innovation and manage economic downturns better. They also tend to be very profitable. Over the last 15 years, for instance, shares in employee owned businesses have considerably outperformed those in the FTSE All-Share Index.
An EOT is a straight forward business ownership model. It is relatively simple to implement and very flexible to the unique needs of your business.
Business Owner Benefits
- You pay zero capital gains tax.
- You are guaranteed full market value for your shares.
- Your competitors will not know you are selling the business.
- Selling to an EOT commonly takes less time than selling to a 3rd party.
Employee Benefits
- Are able to receive tax-free annual bonuses of up to £3,600.
- Are able to have a meaningful say in how the business is run and operated.
- The culture and growth of the business is fueled by greater commitment and productivity from employees.
Are there any downsides to an EOT?
The increasing popularity and performance of companies who create an employee ownership trust suggests there really aren't many downsides. Like any change to your business though, the companies goals and the current owners personal objectives need to be considered.
For the business owner looking to exit the business, setting up an EOT will result in payments being made over time by the trust. You wont get an immediate one lump sum and you need to be confident of the companies continued success so that they can make further payments.
When turning ownership over to the EOT you also need to be certain that the people in the business want to take shared ownership. Is there a motivated leadership team that is excited by the plans? Do the lower ranked staff have any interest in the scheme? The current owners and leadership team will need to have these conversations, promote the EOT plans and take the company through the process.
For modern thinking companies who want to empower their staff an EOT is an exciting succession plan and step forward for the business. When you talk to Loucas about creating an EOT we will guide you through the process and benefits to ensure it is a good fit for you and your business.
Book an EOT introduction call
Making an enquiry with Loucas is very simple and definitely not salesy. We want to ensure that we understand your business and personal goals so that we can advise you properly. Our experienced EOT team values their client relationships and wants to be sure of providing the best service. We do not just say yes to every company.
Book an EOT Introduction Call today by requesting a call back or calling and speaking to us on 01622 758257.
What our customers say...
Below are just some of the thousands of happy customers Loucas have helped since 1974.
OLFAT - TK MINDS
After many years working with different kind of accountants offices over Europe, Loucas by far the best service I've ever dream of!
The team are so professional, handling every single detail without giving any burden on client shoulders, very responsive via email or calls & mostly they have very advanced/up to date systems to keep track & issue reports which made all my business life smooth & easy.
I highly and always recommend their firm to others. Keep the great work then. Thank you so much for all your support.
RHYS - RED BUD MEDIA
I have been using Loucas for the last 16 months for both my business and personal accounts.
I cannot recommend them highly enough to anyone who is looking for an accountant.
They are extremely knowledgeable, helpful and professional. As a new business owner, they have been very patient in guiding me through what is required for me to do and are always a phone call away if I have any questions.
One of the best decisions we have made in our fledgling business was to pick Loucas as our accountants.
NIKKI
We've had a great experience using Loucas over the years for the business I work in.
They are knowledgeable, reliable and prompt at helping with everything we need, always! The payroll department have been second to none and we'd highly recommend their services.
RICHARD - COMPANY DIRECTOR
Loucas have been my accountants for around 20 years, which should be testament enough to how good I find them.
Their professionalism and service is second to none and they always manage to communicate clearly and simply.
Highly recommended.
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Really good accountants, especially the payroll ladies who are always very friendly and helpful and nothing is too much trouble for them.
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I have enjoyed working with all the team members.
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