Selling out of an employee ownership trust

A great deal has been written about selling companies into employee ownership trusts (EOT). Now that the legislation is nearly nine years old (it was enacted by FA 2014) some of the early adopters are finding that companies are being sold out of the EOTs. We have recently been involved in such a transaction which threw up some interesting issues so we thought we would share our experiences.

The tax rules

For those readers who are not familiar with the legislation a sale of shares of a trading company into an EOT will be free of capital gains tax (CGT) as the transaction will be treated as a no gain no loss transaction for capital gains purposes so long as a number of ‘relief requirements’ are satisfied (TCGA 1992 s 236H). The relevant legislation is at TCGA 1992 s 236H to s...