Employee Ownership Trusts (EOTs) offer a unique ownership structure that allows companies to transition ownership to their employees gradually. Established by the Finance Act 2014, EOTs are gaining popularity as a means of fostering employee engagement, loyalty, and commitment.


What is an Employee Ownership Trust?


An Employee Ownership Trust (EOT) is a trust created to enable a company’s employees to become owners of the business. It can be established by existing owners as part of succession planning or by founders starting a new business with an employee-owned vision.


Benefits of Employee Ownership Trust


Engagement and Commitment: EOTs promote a sense of ownership and pride among employees, leading to increased engagement, motivation, and loyalty.


Succession Planning: EOTs offer a seamless and tax-efficient way for business owners to transition ownership while preserving jobs and ensuring the company’s continuity.


Tax Advantages: EOTs provide various tax reliefs, including capital gains tax relief for selling shareholders and income tax exemptions for employees.


How Does an Employee Ownership Trust Work?


Establishment: Shares of the company are transferred to the EOT, which holds them on behalf of the employees.

Trustee Role: Trustees manage the EOT and act in the employees’ best interests.


Employee Benefits: Employees become beneficiaries of the trust and may receive distributions based on predefined criteria.


Tax Reliefs


Capital Gains Tax Relief: Transferring shares to an EOT qualifies for full relief against capital gains tax, provided certain conditions are met.


Income Tax Free Bonuses: Bonuses paid to employees of EOT-controlled companies are exempt from income tax, subject to specific requirements.

Key Considerations


Legal and Financial Advice: Seek professional advice to ensure compliance with legal and regulatory requirements.


Communication and Engagement: Effective communication with employees is essential to gain buy-in and facilitate a smooth transition to employee ownership.


Governance Structure: Establish clear governance structures to facilitate decision-making and accountability within the EOT.




Employee Ownership Trusts offer a compelling solution for business owners looking to transition ownership to their employees. By empowering employees and aligning their interests with those of the business, EOTs create a win-win scenario for all stakeholders involved.


Ready to Explore Employee Ownership Trusts?


Contact Morgan Reach today to learn more about how Employee Ownership Trusts can benefit your business and its employees.


This guide provides an overview of Employee Ownership Trusts, including their benefits, workings, tax reliefs, key considerations, and more. For expert advice on implementing an EOT for your business, reach out to the experts at Morgan Reach today.