EOT

An EOT is a planned exit. It is not overnight process. The quickest we’ve seen is about three months but you should expect it to be longer. It typically takes a minimum of 4 weeks to gain clearance from HMRC, then begins the dialogue between employees and owner so that everyone understands the opportunties and benefits.

Based on the Finance Act of 2014 EOT’s are incentivised to encourage more employee ownership.

1. When an owner-manager sells the business to an EOT, they do not pay any capital gains tax so long as control passes to the EOT. 
2. For employees, they can also benefit as business owners can grant them a bonus of up to £3,600 per annum on a tax-free basis.

Since the EOT is often a friendlier buyer, the transaction costs are usually lower and matters may proceed more quickly than with a third party buyer. However, employee ownership trusts are quite complex to administer and are, therefore, more expensive than other options. That does not mean that the benefits are not still worth creating one. When you talk with Areos about an EOT all the costs, plus the pros and cons will be explained to you so that you can make the right decision to suit your succession plans for the business.

There are virtually no downsides to an EOT. It must be remembered though that it is different to selling your business to a buyer. 

If you want to exit the business and get paid quickly then an EOT may not be for you. 

For an EOT to succeed you should also have good confidence in the team you are leaving in charge.

Otherwise an EOT is a great strategy to explore and opportunity for you to leave a greater legacy.

The first steps of creating an EOT is a strong personal understanding of the benefits to you and your staff. 

This is so you can begin the dialogue with them about the planned exit and the opportunity available to them.

Areos will support you in both these areas and enable you to launch the EOT successfully.