Transferring ownership of a company to an employee-controlled trust has emerged as the fastest-growing means of business disposal in recent years. Between 2021 and 2024, the number of Employee Ownership Trusts (EOT) in the UK more than trebled to 1,700, with EOTs now accounting for 6% of all business transfers.
Much of this increase has been put down to generous tax breaks. However, as we’ll explore in this article, the benefits to both business owners looking for an exit strategy and to their employees go far beyond those incentives. Here’s why EOTs are on the rise, and what you need to know about the main benefits.
What is an Employee Ownership Trust?
Introduced by the government in 2014, an Employee Ownership Trust is a company that is owned by its employees via a trust. Unlike direct share ownership models where employees take control of a company by purchasing shares, with an EOT, the trust holds the shares on behalf of employees, making the trust the legal owner. The trust is managed by trustees who have a legal responsibility to run the business with the interests of employees, customers, and management in mind.
What are the tax incentives for EOTs?
EOTs have carried generous tax incentives since they were first introduced. Those breaks are:
- 100% Capital Gains Tax (CGT) relief for company owners when they dispose of their business to an EOT.
- 100% Inheritance Tax (IHT) relief on all assets transferred to the EOT, and exemption from the IHT charges certain types of trust are liable to pay.
- An income tax exemption for annual bonuses paid to employees up to the value of £3,600.
In an evaluation of EOTs undertaken by HMRC in 2025 assessing the impact of these three incentives, former owners of companies reported that the most attractive part of disposing of their business to an EOT was the 100% CGT relief. Owners also acknowledged the income tax relief on employee bonuses as a ‘nice to have’. However, trustees who were not previous owners of a company transferred to an EOT said the tax exemption on bonuses was the most helpful factor in being able to sell the idea of employee ownership to employees.
Benefits Beyond Tax
While the tax benefits clearly play a significant role in making EOTs an attractive option, they aren’t the only advantages. Nor do they fully explain the sharp rise in EOT numbers over the past few years, given that the tax breaks have been in place since 2014.
For business owners, transferring control to an EOT represents a quick, streamlined disposal option. It avoids the often protracted process of finding a buyer, undergoing due diligence, negotiating a price etc. Many owners turn to an EOT when other disposal options are limited. And it allows them to still maintain an interest in the business (up to 49%) while handing over the controlling stake.
Former owners, trustees and employees involved in EOT takeovers also talk about the benefits of maintaining a company culture and structure. Owners who have dedicated their careers to building a business are often concerned that selling it on when they retire will result in major changes, and are particularly concerned about the impact on their staff. An EOT explicitly puts employees’ interests first, and that usually means maintaining continuity.
From the employees’ perspective, research shows that those working under an EOT feel a strong sense of job security and organisational commitment. That contributes positively to morale, which in turn bolsters staff retention, productivity, and overall helps to make a business adaptable and resilient.
Find out more about joining a growing movement
In summary, while it’s not exactly clear why EOTs have seen such a leap in popularity in the past four years, what we can say is that they offer business owners and their employees alike an attractive blend of financial efficiency, convenience, employee empowerment, and business continuity. Throw in the generous tax reliefs, and it’s no surprise why so many business owners are choosing this method of disposal.
To find out more about EOTs and what the disposal process involves, please get in touch with our Corporate Finance team.
