As a business, it can be beneficial to look into employee ownership trusts (EOTs), schemes that offer generous tax reliefs to encourage shareholders to promote employee ownership and sell controlling interests in their companies.

You can set them up through an EOT trust deed but it’s essential that you give due consideration to who the trustees are going to be, particularly if a director or employee is going to be appointed, as conflicts of interest could potentially arise.

EOTs were launched back in 2014 as a tax-efficient way of transferring ownership of a company, with many businesses choosing to go down this route where one person is in control of the enterprise and is looking to either retire or decrease their involvement substantially.

There are various tax benefits that can be enjoyed, including paying employees a tax-free bonus of up to £3,600 annually. In addition, the seller won’t have to pay any capital gains tax when they sell shares with no upper limit on the value.

Employees will also be given the power to vote on major decisions that affect the company, allowing them to influence the performance and direction of the firm.

Other benefits include buying the company when there are no other prospects of purchase by a third party, and the management team will not have to take on personal debt to fund a buyout or buy the shares themselves personally.

In order to be able to set up an EOT, you will need to meet a series of requirements. For example, your company must be a trading company or the principal company of a trading group and the property settled on the EOT has to be applied for the benefit of all eligible members of staff on equal terms.

If you’d like any further help or advice relating to EOTs, get in touch with tax planning accountants s4B today.