The 2014 Finance Act changed the tax treatment of disposal of shares to EOT’s employee ownership trusts, the result being that if you sell a majority of your shares to an EOT you are not required to pay Capital Gains Tax on this sale. *
Understandably this gets a lot of people excited however there are significant pro’s and cons for this route and like all complex questions whether this is right or wrong for you depends on you and your business.
People who do successfully transfer to an EO model and sell this way say things to me like;
“I want to look after people who have looked after me for 25 years”
“ I want to preserve the legacy of the business but the kids aren’t interested”
“I don’t want the uncertainty or stress of a trade sale process”
“I and the staff want the business to continue in its current shape”
They tend not to say – “Lovely I’ll save £ X00,000 in tax.” (Though this can be an outcome it is rarely the prime motivation).
There are hurdle levels of participation to meet the criteria required and HMRC approval needs to be obtained as part of the sale.
You will need specialist legal advice but its not usuriously expensive if you pick the right ones and I can help here.
An accountant who understands the EO landscape is helpful and you will also need your IFA in your advisory doughnut.
Further reading and other good resources
Chris Budd wrote an excellent and easily digestible book and was personally very helpful to me about 5 years ago when I started this journey. (amazon affiliate link here)
On legals and overall set up I have great experience of the following practitioners;
Christian Wilson – Spencer West
Ewan Hall – Baxendale
Current EO appointments as Independent Trustee
