EOT

EOT

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Employee Ownership Trusts (EOTs)

An EOT is a form of employee trust that provides indirect ownership of shares to employees. It acts as a collective vehicle, acquiring a controlling interest in a company for the long-term benefit of its employees.

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Tax Incentives for EOTs:

  • Capital Gains Tax Exemption: Individual shareholders who sell to an EOT can benefit from this exemption.
  • Income Tax Exemption: Bonuses of up to £3,600 per annum per employee are exempt from income tax (but not NICs).
  • Corporation Tax Relief: EOTs receive relief on bonuses.
  • Inheritance Tax Exemption: Eligible gifts or sales at undervalue to EOTs are exempt from inheritance tax.

How we can help

  • Understanding your needs: We will drill down to understand your motivating factors. We will explain the implications to you and assess whether there are alternative structures.
  • Planning: We will walk you through the tax implications in detail to help you with your decision making.
  • Structuring the Deal: A robust valuation will be carried out. We will work with your legal advisers to draft the necessary legal paperwork and ensure this is aligned with the company's overall strategy.
  • Corporate Governance and Communication: We will help you to understand the processes involved and ensure transparency. Communication is crucial and we will also help you to communicate with your team to ensure a smooth transition.
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Key Conditions for EOTs:

  1. Trading Requirement: The shares placed in the EOT must be in a sole trading company or the principal company in a trading group. Non-trading activities should not dominate the group’s activities.
  2. Controlling Interest Requirement: EOT trustees must own over 50% of the shares, have majority votes, and be entitled to more than 50% of profits available for distribution.
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