Kathy Granby and Matthew Rowbotham from our Tax, Rewards and Incentives team discuss the increasing popularity of moving to employee ownership, with a focus on Employee Ownership Trusts (EOTs).
In the changing landscape of business ownership, becoming employee owned has emerged as a compelling alternative for agencies and businesses alike. But what exactly are EOTs, and how do they work? What are the benefits of the structure? Does it have any pitfalls? And where do you need to be as a business to truly embrace it?
Key takeaways:
- The Employee Ownership Association estimates that in the UK, the employee owned sector contributes over £30 billion to our GDP and the sector is estimated to be growing by around 10% a year.
- Introduced by the government in 2014, there are a range of tax reliefs that are only available for businesses transferring to an EOT structure.
- EOTs can support viable succession planning for business owners.
- Company valuation, commercial viability, cash flow, and purchase price are key considerations before committing to an EOT structure.
- The government recently published a consultation on the Taxation of Employee Ownership Trusts. The outcome has not been published and whilst it may mean that employee ownership will become less flexible, it aims to ensure EOT's are being used in the appropriate way.
- The benefits of EOT for businesses include higher employee
engagement and collaboration, increased innovation at all levels
and alignment on business improvements.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.