Originally written by Anna Jordan on Small Business
Employee ownership trusts (EOTs) are relatively new in the business world.
The EOT survey 2019 shows that there are 241 verified EOT-owned companies and a further 34 EOT-owned companies that have been established for longer, otherwise known as ‘deemed EOTs’. Between the two, EOTs employ 23,000 people in the UK.
It’s a popular model in the manufacturing and professional services sectors. A large proportion are represented in London and Scotland, with virtually none in Northern Ireland.
Over half (55 per cent) of EOTs own the entire company; a further 40 per cent are hybrid models in which the EOT is a majority owner alongside employee shareholders and/or founders.
BDO predicts that a combination of Covid-19 and a rise in Capital Gains Tax (CGT) mean that shareholders are becoming increasingly likely to sell off companies before the end of the 2020/21 tax year.
We’ll explain just what an employee ownership trust is and the pros and cons of transitioning to this model.
What is an employee ownership trust?
An employee ownership trust is a specialist form of an employee benefit trust, introduced by the government in 2014.
With an employee ownership trust, shareholders are encouraged to sell their shares into a trust