Employee Ownership Trust: Summary
Posted: Wed Feb 19, 2025 7:45 am
This article briefly summarizes the potential benefits of an Employee Ownership Trust (“EOT”), and why using an Isle of Man trustee may be beneficial.
If you need additional information we have a more detailed article on this topic: Employee Ownership Trusts: An Introduction .
HMRC Open Consultation
Any discussion regarding EOTs with non-resident trustees should begin with reference to the HMRC open consultation on this topic, which closed on 25 September 2023. The current rules leave the possibility of non-resident EOTs escaping UK tax liability on onward sales to third party purchasers. While there is no evidence of widespread offshore EOT abuse, HMRC believes that some refinement of these rules is necessary.
Although we eagerly await the outcome of the open consultation, we thought greece mobile database this would be a good opportunity to outline the basics of EOTs, their benefits and the value that a properly licensed and regulated Isle of Man trustee can add to EOT planning.
1. What is an Employee Ownership Trust and why use it?
EOT is a method of simplifying the employee ownership model and involves transferring ownership of the business into a trust for the long-term benefit of all eligible employees.
The UK government has encouraged its employees to transfer businesses through EOT, with significant tax relief for the departing owner. Under EOT, majority shareholders can sell more than 50% of the share capital to the trust, receiving tax relief.
The circumstances and objectives of both the exiting owner and the business will typically determine whether EOT is the right solution. Common drivers for EOT planning include; where private owners are considering succession planning, supporting growth plans and/or starting a new venture.
EOTs should not be viewed as mere tax-planning tools. Their establishment should truly benefit the ongoing success of the business and its employees. The comprehensive benefits are explored in the next section.
If you need additional information we have a more detailed article on this topic: Employee Ownership Trusts: An Introduction .
HMRC Open Consultation
Any discussion regarding EOTs with non-resident trustees should begin with reference to the HMRC open consultation on this topic, which closed on 25 September 2023. The current rules leave the possibility of non-resident EOTs escaping UK tax liability on onward sales to third party purchasers. While there is no evidence of widespread offshore EOT abuse, HMRC believes that some refinement of these rules is necessary.
Although we eagerly await the outcome of the open consultation, we thought greece mobile database this would be a good opportunity to outline the basics of EOTs, their benefits and the value that a properly licensed and regulated Isle of Man trustee can add to EOT planning.
1. What is an Employee Ownership Trust and why use it?
EOT is a method of simplifying the employee ownership model and involves transferring ownership of the business into a trust for the long-term benefit of all eligible employees.
The UK government has encouraged its employees to transfer businesses through EOT, with significant tax relief for the departing owner. Under EOT, majority shareholders can sell more than 50% of the share capital to the trust, receiving tax relief.
The circumstances and objectives of both the exiting owner and the business will typically determine whether EOT is the right solution. Common drivers for EOT planning include; where private owners are considering succession planning, supporting growth plans and/or starting a new venture.
EOTs should not be viewed as mere tax-planning tools. Their establishment should truly benefit the ongoing success of the business and its employees. The comprehensive benefits are explored in the next section.