Introduced by the Government in 2014 to expand employee share participation, Employee Ownership Trusts (often referred to EOT’s) have become one of the most popular options for owners to secure a tax efficient exit from their business.
Properly structured, the sale of an individual’s shares in a trading company will be free of capital gains tax. In addition, the employees of the company can benefit from a tax-free annual bonus of up to £3,600.
As with any generous tax reliefs there are qualifying conditions that need to be met (by both the EOT and the company) in order to benefit from these. These conditions must also continue to be met on an ongoing basis in order to prevent the tax reliefs from being withdrawn.
One of the fundamental conditions that needs to be met is the “equality and participation test” which can often be misunderstood and if breached can be costly.
Freestone Jacobs have extensive experience in establishing EOT’s for all sizes of companies and we can also act as an independent Trustee to ensure that the qualifying conditions continue to be met.
For more information please contact us.