Employee Ownership Trusts

Reviewed January 2026

Introduction

An EOT is a type of employee benefit trust that is created for the purpose of acquiring shares representing at least a controlling stake (i.e., >50%) from the existing shareholders (often the founders) of a company. The EOT holds the shares for the long-term benefit of the employees of the company as a whole. As a result, the selling shareholders may benefit from a series of attractive tax advantages.

This guide should not be relied upon as legal advice and you should contact us for advice on your specific circumstances

The EOT Structure

The EOT structure can be used to facilitate the exit of shareholders who hold a controlling interest in a company and would like to reward the existing employees by allowing them to indirectly own the business which they helped to build, rather than selling the company to a third-party buyer. An EOT may also be a solution for:

• Family-owned companies where the next generation are not in a position to take over running the business.
• Entrepreneurs who want to retire and realise value, but who want the business they have built up to continue on and do not want to end up working for a new buyer at the end of their career.
• Any business where the continued commitment and motivation of all employees is key.

Practical advantages of selling to an EOT? 

There are many practical advantages for shareholders who sell their shares to an EOT, some of which are highlighted below:

• It allows employees to indirectly buy the company from its shareholders without using their own funds.
• Shareholders can sell their shares for full market value (backed up by an independent share valuation).
• Not all shareholders are required to sell their shares to the EOT.
• Selling shareholders who are also directors can remain in place post-disposal and continue to receive market rate remuneration.
• A sale to an EOT may be less adversarial than a traditional sale to a third party, meaning the sale process can be quicker and at a lower cost.
• Provided the relevant requirements are met, EOT 50% capital gains tax relief may be claimed by the selling shareholders i.e., only 50% of any gain on a disposal of a controlling interest to an EOT will be treated as chargeable for CGT purposes.
• Provided the relevant requirements are met, the sale of shares to the EOT by the shareholders will be an exempt transfer for inheritance tax purposes.
• A more incentivised workforce that is receiving tax-free bonuses and seeing the benefits of their ownership may help to drive increased profits. An EOT may also boost morale and help with staff retention.

Receive our guide

To provide an introduction to EOTs, we have compiled a complimentary guide. This sets out useful details on EOTs, including how they work, the tax reliefs that may be available, as well as setting out some practical advantages of a shareholder selling a controlling interest in the company to an EOT.

To receive our guide, please email any of the following: Mark Williams, Beth Jones or Christiana McKeown.