Helping you incentivise staff and plan succession with confidence.

Employee Ownership Trusts give business owners a route to sell a controlling interest in their company for the long-term benefit of employees, while preserving continuity, protecting culture and creating a structured handover over time.

For the right business, an EOT can still be a compelling succession model in 2026, but the rules are tighter than they were and the tax analysis now needs to be more disciplined from the outset.

The legal and tax landscape for EOTs has changed materially since late 2024 and again from 26 November 2025. Any web copy in this area should now reflect the tighter regime rather than the historic “full CGT exemption” narrative.

What has changed?

• From 30 October 2024, qualifying EOT trustees must be UK resident as a single body of persons, and the rules were tightened to stop former owners retaining control through the trust structure.
• The trustees must take reasonable steps to ensure the consideration paid does not exceed market value, which increases the practical importance of robust valuation evidence.
• The clawback period for certain post-sale breaches was extended to the end of the fourth tax year after the tax year of disposal, so compliance matters for longer after completion.
• The income tax bonus rules were adjusted so directors can be excluded from the participation requirement in the relevant circumstances.

What changed again after Budget 2025?

• For qualifying disposals on or after 26 November 2025, only 50% of the gain is relieved at the point of sale; the other 50% is treated as a chargeable gain for CGT purposes.
• Business Asset Disposal Relief and Investors’ Relief are not available where relief under the EOT disposal provisions is claimed.
• The balance of the gain is effectively held over through a reduction in the trustees’ acquisition cost, so transaction modelling is now more nuanced than before.
• The headline message in 2026 is therefore not “tax free sale”, but “potentially tax-efficient employee ownership under a more carefully regulated framework”.

This page is marketing content rather than tax advice. Specific transactions need bespoke legal and tax analysis before any conclusions are drawn.

We work closely with business owners, management teams, trustees and funders to test whether an EOT is the right route, map the transaction stages and document the structure in a way that matches the strategic aims of the business.

Assessing suitability

We help you understand the qualifying conditions, likely transaction shape, governance model and commercial implications before you commit significant time and cost.

Structuring the deal

We advise on vendor-funded and third-party financed transactions, trustee arrangements, constitutional documents, sale mechanics and stakeholder alignment.

Managing completion

We coordinate the legal workstream from trust and trustee company set-up through to the share purchase agreement, disclosure process and completion documents.

Key considerations

To access the available incentives, the statutory requirements need to be met in substance as well as form. The transaction also needs to stand up commercially.

• The sale must transfer a controlling stake, meaning over 50% of the relevant share capital and voting control on the statutory tests.
• The company must be a trading company, or the principal company of a trading group, and the trust must operate for the benefit of eligible employees on equitable terms.
• The trustee board composition, trust governance and ongoing compliance need careful attention under the tightened rules.

Typical transaction steps

If the business is moving ahead with an EOT, a typical process usually includes the following legal and structural workstreams.

• Establish the Employee Ownership Trust and incorporate the trustee company.
• Obtain an independent valuation to support fair market value.
• Review whether HMRC clearance applications are appropriate for the structure and funding model.
• Negotiate and complete the share purchase agreement and related governance documents.