Employee Ownership Trusts (EOTs): the most tax-efficient exit?
21 December 2022
EOTs are becoming an increasingly popular exit route for business owners, with the lucrative tax breaks high on the list of attractions.
A sale to an EOT allows for a complete exemption from Capital Gains Tax (CGT) for the exiting shareholder(s), with majority beneficial ownership of the business’ passing to its employees. Very few other exit events can compete with a 0% headline tax rate for relinquishing owners.
However, short-term tax exposure is only one (small) aspect of any transaction. Wider commercial, financial and legal considerations, short and longer term, must be properly understood. Sale to an EOT may be right for some, but certainly not all, with consideration of relevant alternatives also important. Management Buy Outs (MBO), Management Buy Ins, VC/Private Equity investment and trade sales are some of the other options.
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Magma’s Corporate Finance team can help you consider all business exit options, including EOTs. Feel free to get in touch.
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