Introduced by the UK government in 2014 to promote employee ownership, EOTs are a specific type of Employee Benefit Trust that acquires shares in a company and holds them on behalf of the employees. EOTs gained significant traction following regulatory changes in 2020. According to the Employee Ownership Association, employee-owned businesses are now growing at an average rate of 23% annually - an upward trend reflected in Grant Thornton’s experience.
“There has always been demand for succession planning, but Employee Ownership Trusts are attracting a lot of interest and can be a valuable option for businesses in our region,” said Tara Walker, an Associate Tax Director who is focused on equity-based employee rewards at Grant Thornton in the Midlands.
“By design, the EOT encourages long term employee ownership, incentivised by a sale free from capital gains tax and up to £3,600 per year tax free for employees in qualifying bonus payments. EOTs allow business owners to pass on their legacy while fostering a culture of shared success among employees. Studies also show that employee-owned businesses often experience higher levels of motivation, productivity, and retention, leading to long-term success.”
Tara Walker joined Grant Thornton earlier this year to boost the team’s offering. “Tax efficiency is understandably of great interest to business owners and the potential for capital gains tax exemptions makes EOTs an attractive financial option for people seeking an exit strategy.”
While HM Revenue & Customs (HMRC) does not release official figures on EOT formations, industry data highlights their accelerating adoption. By the end of 2023, over 1,650 UK businesses had transitioned to employee ownership, with 542 making the shift in 2023 alone.
Monique Beaulieu, Partner in Tax and Reward Advisory Services at Grant Thornton UK, noted: “Interest in employee-owned businesses continues to grow across all sectors and regions. Last year’s consultation and the Autumn 2024 budget adjustments have not dampened enthusiasm for EOTs as a viable succession planning tool, particularly among business owners in the Midlands.”
Grant Thornton has played a pivotal role in guiding businesses through the complexities of employee ownership transitions in the region. From structuring deals and managing tax considerations to ensuring regulatory compliance, the firm’s experts have helped companies unlock the full potential of EOTs.
Monique Beaulieu added: “Our team has a proven track record, established over the years by working with over 40 businesses transitioning into employee ownership, meaning that more than 23,000 employees now share in the ownership of the company they work for.”