Fact Service June 2022

Issue 23

Businesses transferring ownership to employees reaches five year high

The number of businesses transferring ownership to employees through employee ownership trusts (EOTs) has reached a five year high, according to law firm Boodle Hatfield.

It has found a 200% increase in EOTs in just two years, up from 127 in 2019 to 384 in 2021, and says they are increasingly popular among entrepreneurs looking to exit their business. EOTs enable owners to sell their shares to employees via a trust company, normally for full market value. In doing so, the company says, they do not incur income, capital gains or inheritance tax liabilities on the disposal.

The model was set up by the government in 2014 to encourage greater employee ownership of businesses. According to Boodle Hatfield, EOTs particularly suit owners who want to step away from their business gradually. Companies that have opted for the move include retailer Richer Sounds, Riverford Organic Farmers and publisher the Folio Society.