Employee ownership trust (EOT) meaning

In this issue Budgets, Autumn Statements and Finance Bills Company law, governance and regulatory matters New content Trackers Weekly highlights from other practice areas Budgets, Autumn Statements and Finance Bills Budget 2025 The Chancellor, Rachel Reeves, presented the government’s Budget on 26 November 2025. From a Share Incentives standpoint, the key update was: Employee ownership trusts: with immediate effect for disposals on or after 26 November 2025, capital gains tax (CGT) relief on qualifying transfers of shares to the trustees of an Employee Ownership Trust (EOT) falls from a 100% exemption to 50%. Draft legislation has been released for inclusion in Finance Bill 2025–26. Section 236H of the Taxation of Chargeable Gains Act 1992 will be amended so that, where the disposal relief conditions are satisfied, 50% of the gain is treated as a chargeable gain of the disposing shareholder for CGT. Business Asset Disposal Relief and Investors’ Relief will not be available for the...

What is an employee ownership trust? An employee ownership trust (EOT) is a specific kind of employee benefit trust (EBT) that must meet statutory criteria. The concept was introduced by the Finance Act 2014 (FA 2014), together with tax advantages for companies owned by an EOT and for individuals who dispose of shares to an EOT. If the statutory criteria are not met in relation to the EOT, these reliefs will not be available. The reliefs were enacted by FA 2014, Sch 37, following a Budget 2013 announcement and a subsequent consultation. For guidance on pitfalls and common errors when creating or running an EOT, see Practice Note: Pitfalls of setting up and operating an employee-ownership trust. For general information on EBTs, see Practice Note: What is an employee benefit trust? What tax reliefs can an EOT provide? Three tax reliefs were legislated, in line with a policy of encouraging the development of employee-owned companies as an alternative to a trade sale or other loss of independence...

Employee benefit trusts (EBTs) are a form of discretionary trust created primarily to allow companies to deliver shares, cash or other rewards to employees within the workforce. They are frequently used to underpin employee share plans and to promote broader employee share ownership. For broader background on EBTs, see Practice Note: What is an employee benefit trust? This Practice Note considers how private company sales can affect EBT share arrangements and the practical hurdles for businesses running them in practice. It explores the potential consequences for EBT-held shares where a private business is sold, and highlights key practical considerations for companies that operate such trusts. Note that further complications may emerge where share trading occurs on a PISCES. For more on this, see Practice Note: PISCES and share incentive arrangements in particular. Understanding the nature of the EBT’s shareholding At the outset, when assessing a potential corporate deal’s effect on an EBT, consider the character of the EBT’s shareholding (held by the trustee or trustees of the EBT...

What is an employee ownership trust? An employee ownership trust (EOT) is a type of employee benefit trust that meets defined statutory conditions within tax legislation. The Finance Act 2014 brought in specific tax advantages available to companies owned by an EOT and to individuals disposing of shares to an EOT. For general information on EOTs, including an outline of the key features and tax reliefs, see Practice Note: Employee ownership trusts. For a review of common pitfalls, and mistakes or misconceptions that can arise when creating or running an EOT, see Practice Note: Pitfalls of setting up and operating an employee ownership trust. This Practice Note addresses selected tax and practical issues that may arise where the trustees of an EOT sell a company already owned by that EOT. For further detail on the considerations involved in an initial sale of a company to an EOT, see Practice Note: Sale of a business to an employee ownership trust. Background—overview of the capital gains tax relief. Relief...

This Deed is made on [ insert date on which this deed is executed by all parties ] Parties [ Insert name of Company ], with its registered office at [ insert address of registered office ] and registered number [ insert registered number of Company ] (the Company); and [ Insert name of Trustee ], whose registered office is at [ insert address of registered office ] [ and registered number [ insert registered number of Trustee ] ] (the Original Trustee). RECITALS The Company intends to create a trust for the benefit of the employees of the Company, to be called the [ insert name ] Employee–Ownership Trust, and designed to meet the requirements of section 236J of the Taxation of Chargeable Gains Act 1992. The Company has transferred to the Original Trustee the sum of £[ insert initial settlement amount ] as the initial Trust Fund...

[ insert name of Company ] Company Number [ insert registered number of Company ] (the Company) Minutes of a meeting of the Board of Directors of the Company, convened at [ insert time of meeting ] on [ insert date of meeting ] Name Position Present: In attendance: Apologies for absence received from: 1 Notice and quorum 1.1 The Chair confirmed that proper notice of the Meeting had been provided, that a quorum of directors was in attendance, and that, accordingly, the Meeting was validly convened...