Frequently asked questions

An Employee Ownership Trust (EOT) is a trust, created under UK legislation introduced in 2014, that buys and holds a controlling interest in a trading company on behalf of all its employees. The trust is the long-term steward of the business: it does not run the company day to day, but it owns it, and its trustees oversee the company board on the employees' behalf.

It is often a good fit where the business is profitable and generates cash reliably, where there is capable leadership beneath the owner (or a realistic plan to develop it), and where the owner wants to step back over time rather than sell to a competitor.

It is usually a poor fit for a business in financial difficulty, or where the owner needs the full sale price in cash immediately. Our guide Is employee ownership right for my business? works through this properly.

No. This is the most common misunderstanding. Employees pay nothing. The trust buys the shares from the owner, funded by the company — usually from its future profits, sometimes helped by external borrowing. Employees benefit from the ownership without ever writing a cheque.

You could — direct employee share ownership existed long before EOTs. But it is more complicated, carries fewer tax benefits, and typically requires most employees to buy shares personally, which for many workforces is a deal-breaker. The EOT solves the two hardest problems in one structure: how the purchase is funded, and who stewards the company after the owner leaves.

No. The trust must hold a controlling interest — more than 50% — to qualify for the tax reliefs, but founders often retain a minority stake, and some businesses combine an EOT with direct share schemes for employees. The right mix depends on what you want the ownership to do.

By an independent valuation, on ordinary commercial principles — typically a multiple of sustainable earnings, adjusted for cash and debt. The trustees must be satisfied they are paying no more than market value; the vendor naturally wants a fair price. A defensible, sensible valuation protects everyone, which is why we treat it as a cornerstone of the transaction rather than a formality.

Mostly from the company itself. A typical structure pays the owner part of the price on completion — from existing cash and sometimes bank funding — with the balance paid over several years out of future profits. The affordability question ("can the business pay this without starving itself?") is one we model carefully before anyone commits. See Funding an EOT.

A straightforward transaction typically takes three to six months from decision to completion. The variable is rarely the legal work — it is how settled the commercial questions are: price, leadership, governance and the owner's own plans. Our timeline guide sets out the stages.

It depends on the size and complexity of the business, but considerably less than a trade sale process — there is no broker's success fee and no adversarial due diligence. Wherever possible we quote a fixed fee before we start, so you know the cost before you commit.

Yes, and most founders do for a period. You can remain a director, remain an employee, and be paid market rate for the role. There are limits designed to stop the former owner controlling the trust, but a gradual, well-planned handover is not just permitted — it is usually what makes the transition succeed.

Two main ones. For a qualifying sale of a controlling interest to an EOT, half of the seller's gain is exempt from capital gains tax, giving an effective blended rate of 12% — around half the tax of a conventional sale. (Sales completed before 26 November 2025 were fully exempt.) And once employee-owned, the company can pay each employee a bonus of up to £3,600 per year free of income tax. The conditions attached to both are real and need to be met continuously — that is part of what specialist advice is for.

Usually through profit share, paid as bonuses once the business can afford them — often before the former owner is fully paid, sometimes after, depending on the structure. Beyond money, employees gain security (the business cannot be sold out from under them), a voice in how it is governed, and a genuine stake in its long-term success.

Nothing complicated — and that is the point. Because the trust holds the shares collectively, there are no shares to buy back and no leaver valuations. The benefit of ownership belongs to the workforce as a whole, whoever it happens to include at the time.

No. The company continues to be run by its board of directors, like any other company. The trust owns the company and holds the board to account — much as any responsible shareholder would — and good structures include real channels for employee voice. But ownership and management remain distinct, deliberately.

A typical trustee board mixes an employee-elected trustee, a company-appointed trustee, and often an independent. The right composition depends on the business. What matters more than the labels is that the board has the experience and the confidence to do its job — which is where an independent trustee often earns their place.

Yes, though it should never be easy. The trustees can sell if a sale is genuinely in the beneficiaries' interests — and a well-drafted trust deed sets a deliberately high bar for that decision. If a sale occurs, proceeds are shared among employees, and tax that was relieved on the way in can become payable. The structure protects continuity; it does not imprison the business.

Yes — a significant part of our practice is advising businesses that became employee-owned with other advisers. Governance, trust deed problems, HMRC matters, trustee questions, board relationships: see technical advice for employee-owned businesses.