Worker possession trusts (EOTs) are comparatively new within the enterprise world.
Simon Blake, companion at accounting agency, Value Bailey mentioned {that a} troublesome funding surroundings makes the choice of promoting to workers with tax incentives extra enticing, as reported in Monetary Instances.
In August 2025, the UK’s greatest toy agency, The Entertainer, introduced that it was transferring to 100 per cent worker possession.
The newest Worker Possession Affiliation statistics present that there are round 2,250 employee-owned companies within the UK and the quantity is rising.
It’s a well-liked mannequin within the skilled companies (38.2 per cent), development (13.2 per cent) and manufacturing (12.8 per cent) sectors.
We’ll clarify simply what an worker possession belief is and the professionals and cons of transitioning to this mannequin.
What’s an worker possession belief?
An worker possession belief is a specialist type of an worker profit belief, launched by the federal government in 2014.
With an worker possession belief, shareholders are inspired to promote their shares right into a belief which is held on behalf of the workers of an organization. It’s extra widespread in enterprise succession methods however will also be used if a enterprise needs to scale-up or change its construction.
John Lewis led the way in which on worker possession within the UK and now has a workforce of over 74,000 ‘companions’. Nicely-known corporations who’ve taken on an worker possession belief embody Aardman, richer sounds and Riverfords.
What situations do I must know to maneuver to this mannequin?
To open an worker possession belief, that you must meet the next standards:
- The corporate whose shares are transferred should be a buying and selling firm or the principle firm of a buying and selling group
- All workers should profit from the EOT. Nonetheless, this excludes any workers within the enterprise who already maintain 5 per cent or extra of the share capital within the enterprise on the time the belief is about up, who can not profit from the scheme.
- The trustees should retain, on an ongoing foundation, not less than a 50 per cent controlling curiosity within the firm.
The tax reliefs are topic to those situations, particularly the 50 per cent controlling possession.
Actually, many of those are ongoing situations; disqualifying situations could be:
- The corporate stopping commerce
- The EOT failing to satisfy the entire worker profit necessities or controlling curiosity necessities
- A breach of the restricted participation requirement
- The trustees not following the rule of equality
Execs of worker possession trusts
There are many advantages for the enterprise homeowners, shareholders and workers.
If they’ve higher involvement within the enterprise, workers will likely be extra motivated and modern
“There’s a psychological change that occurs while you personal one thing,” mentioned Deb Oxley, CEO of the Worker Possession Affiliation. “It drives behaviours that relate to what must be achieved slightly than what you need to do. It’s this shift that helps to drive success in an worker owned enterprise.”
As workers are extra closely concerned, it’s proven to scale back absenteeism too.
Tax-free bonuses for workers
Corporations co-owned by EOTs are additionally in a position to pay tax-free money bonuses to their workers of as much as £3,600 per worker per 12 months.
Increased workers retention – and attracting workers
If workers have a higher private funding within the enterprise, they’ll stick round for longer. What’s extra, it’s an interesting perk to position in your job adverts to draw workers.
Co-owned corporations could be extra profitable, worthwhile and sustainable
As they play an even bigger half within the enterprise, workers grow to be extra entrepreneurial and need to contribute to the corporate’s success. It’s additionally a means of rewarding workers who’ve been loyal to the enterprise and contributed to its success.
The enterprise proprietor can nonetheless be on the board in the event that they haven’t bought all of their shares, passing on the tradition and values of the enterprise earlier than they go away it altogether. “This makes workers custodians of the enterprise for future generations, making selections and funding over the long term, that means the roles and development is rooted within the location for the long term,” mentioned Oxley.
That is compared to a commerce sale the place there aren’t any ensures that the enterprise will be capable of preserve its tradition, ethos, location and workers.
“It provides founders a means of exiting the enterprise whereas sustaining the tradition, ethos and values of the enterprise whereas rewarding those that have supported the enterprise in turning into successful and permitting it to proceed its half in provide chains and serving the communities through which the enterprise relies,” she added.
Shareholders get 50 per cent Capital Positive aspects Tax aid (as of November 25, 2025)
When you personal a buying and selling firm, now you can promote some – or all – of your shares to an worker possession belief with 50 per cent CGT aid. Circumstances had been launched on October 30, 2024. The modifications purpose to, in keeping with the federal government web site:
- Be sure that former homeowners can not retain management of the corporate post-sale by retaining management of the Worker Possession Belief
- Require that the trustees of a qualifying Worker Possession Belief be UK resident as a single physique of individuals
- Require that cheap steps are taken to make sure that the consideration paid on disposal of shares to the trustees doesn’t exceed market worth
- Requires people to supply extra data to HMRC on the level of claiming the aid, and likewise will increase the time frame inside which aid could be withdrawn from the person if the Worker Possession Belief situations are breached post-disposal
- Offers legislative certainty over the distributions tax remedy of contributions paid to the trustees of an Worker Possession Belief to be able to repay the previous proprietor for his or her shares, by introducing a particular aid which covers such contributions
- Makes a small adjustment to the situations for acquiring Earnings Tax aid on annual bonuses made to workers of Worker Possession Belief owned corporations, to permit for administrators to be excluded from the bonus award
Company tax deduction for corporations offering share incentives
There’s company tax aid on funds to an EOT.
Faster and smoother gross sales
Some shareholders need to promote to worker possession trusts slightly than doing commerce gross sales. These gross sales are faster and smoother than a sale by a third-party purchaser. That is all the way down to fewer negotiations.
Cons of worker possession trusts
As anticipated, there are additionally downsides to EOTs. Oxley mentioned that ‘It nonetheless takes arduous work and dedication and won’t shield you from market pressures.’
Let’s check out a few of them under.
Oblique possession
Possession is oblique, so the corporate doesn’t have full management. A trustee’s position is to not handle the corporate, however to make it possible for the corporate is being led competently and in a means that ensures worker dedication and engagement.
A administration construction will likely be agreed upon establishing the EOT. They should have a say in the way in which the enterprise is run so that they’ll should be thought of – this might be within the type of an workers’ council, having worker administrators on the board and having an organization structure to outline values in relation to workers.
You must belief the trustees will behave with good conduct
Going into an EOT depends in your trustees to comply with the rule of equality.
Shareholders received’t obtain the cash for the sale instantly, so that they tackle extra danger
Cash from an EOT is paid to shareholders over time slightly than right away as it could in a market sale.
The earnings within the enterprise is probably not sufficient to repay the entire sale worth in an affordable timeframe, which might be a deterrent for shareholders. Keep in mind that the worth acquired by the shareholders could also be lower than if the enterprise was bought on the open market.
It’s not at all times straightforward to find out the worth of the enterprise
There is usually a problem in agreeing the worth of the enterprise and the funds the shareholders obtain from the EOT. Don’t fall into the lure of overvaluing the corporate although – you exacerbate danger by elevating the value.
> See additionally: The right way to worth what you are promoting
Complicated and doubtlessly costly
EOTs function on complicated guidelines which could be troublesome to understand. Dips in firm efficiency may additionally have an effect on funding and lengthen the method for promoting shareholders. Gross sales are achieved on a gradual foundation, typically for a number of years.
The worth could be variable too. “As with every transaction that wants authorized and monetary assist, it is determined by the price of these companies from the corporate (or corporations) which you utilize. Typically, a transition to worker possession doesn’t price kind of than a commerce sale,” mentioned Oxley.
Is an worker possession belief proper for my enterprise?
Employment possession trusts have their advantages however they’re not proper for each enterprise.
They may give you the results you want should you’re retiring or desirous about one other succession plan. Alternatively, you won’t really feel a commerce sale or administration buy-out is appropriate or you could possibly be a start-up with a really robust workforce who’ve a shared function.
It might be a greater shout should you’re a medium-sized enterprise. EOTs have had explicit success in corporations with between 50 and 250 workers, though normal EOT numbers are nonetheless low.
No matter you resolve to do subsequent, check out your different choices earlier than you resolve on an EOT. For extra recommendation, communicate to a authorized skilled or head over to the Employment Possession Affiliation web site.
Key takeaways
- With an worker possession belief, shareholders are inspired to promote their shares right into a belief which is held on behalf of the workers of an organization.
- Tax reliefs are topic to situations, notably trustees retaining a 50 per cent controlling share within the firm on an ongoing foundation.
- Execs of worker possession trusts embody tax breaks, higher worker engagement and faster gross sales for shareholders.
- Cons of worker possession trusts embody complexity, potential prices and points that include oblique possession.
- An EOT might be price contemplating as a succession choice, nevertheless it’s typically higher for medium-sized companies (50-250 workers).
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