Benefits of creating an employee owned trust

Employee ownership trusts (EOTs) were introduced by the government in 2014 and as we approach the tenth anniversary of the EOT tax regime after a slow start EOTs have now become very popular as their tax advantages are now increasingly appreciated.

Many vendors are now selling their shares to an EOT rather than enter into a conventional standard trade sale to an outside third party purchaser. The considerable fiscal advantage to the vendor is that provided all the relevant conditions are met no capital gains tax will be payable on the capital gain when the vendor sells its shares to the EOT. The CGT relief will be given by means of treating the sale as a ‘no gain no loss’ disposal. Under these terms the EOT will acquire the company’s shares at the CGT base cost of the vendor.

Basic principles of an EOT

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