An Idiot’s Guide to Employee Ownership Trusts (EOTs)

We asked Andy Froggatt from Royston Parkin, our unLTD finance expert, to give us the lowdown on Trust Law in under 500 words…

Employee Ownership Trusts (EOTs) are a relatively new form of employee ownership in the UK. They were introduced in the Finance Act 2014 and were created to promote employee ownership by allowing business owners to sell their companies to their employees. The aim of EOTs is to help preserve jobs, promote long-term sustainable growth, and encourage a more inclusive and democratic approach to business management.

Under an EOT structure, the shares of a company are sold to a trust on behalf of the employees, who then become the beneficial owners of the business. The trust is managed by independent trustees and its purpose is to hold and manage the shares in the interests of the employees.

The benefits of EOTs include:

• Tax incentives: Business owners who sell their companies to an EOT can benefit from capital gains tax relief, provided certain conditions are met. Employees who receive a bonus payment from the EOT can also benefit from income tax relief.

• Improved employee engagement and productivity: Studies have shown that companies with employee ownership structures tend to have higher levels of employee engagement, job satisfaction, and productivity.

• Succession planning: EOTs provide a way for business owners to exit their businesses in a way that preserves jobs and provides a platform for continued growth and success.

• Enhanced reputation: Employee ownership can enhance a company’s reputation as a socially responsible business, which can be attractive to customers, investors, and potential employees.

There are some challenges to implementing an EOT structure. One of the main challenges is the cost of setting up and managing the trust, which can be a significant barrier for smaller businesses. Additionally, employee ownership may not be suitable for all types of businesses, particularly those that require significant levels of external investment or have a highly competitive marketplace.

The UK government has also shown support for employee ownership, with the establishment of the Employee Ownership Association (EOA), which promotes and provides support and advice to businesses considering this model.

From a tax perspective, there are also several advantages to setting up an EOT. For example, when a controlling stake in a company is sold to an EOT, the transaction is exempt from capital gains tax, which can result in significant savings for the sellers. In addition, companies that are owned by EOTs can also qualify for certain tax reliefs, such as the Enterprise Investment Scheme (EIS) and the Seed Enterprise Investment Scheme (SEIS).

If you are selling your business now or thinking of it in the next couple of years, please contact me on andyfroggatt@roystonparkin.co.uk

Bringing in over £1 million for local causes since launching in 2008, each new Master Cutler of Hallamshire chooses a charity to support, with fundraisers given a £50 fund which they are tasked with growing into as large a sum as possible.

Dame Julie Kenny DBE DL is only the second woman in 398 years to lead the Company of Cutlers in Hallamshire. Her Master Cutler’s Challenge aims to raise £200,000 by September 30 for communityenriching projects at Wentworth Woodhouse, the Rotherham stately home she helped to save for the nation in 2017.

The Grade I listed Georgian masterpiece was crumbling into ruin when her fiveyear campaign with SAVE led to the purchase of the house for £7 million in 2017. Wentworth Woodhouse Preservation Trust, of which Dame Julie is chair, is regenerating the house and changing the economic fortunes, and people’s perceptions, of Rotherham.

In six years, it has become a catalyst for change in South Yorkshire, supporting regeneration, providing jobs and workplace opportunities, and increasing diversity and inclusion.

Dame Julie Kenny, founder of award-winning Rotherham electronic security manufacturer Pyronix, commented: “I want Wentworth Woodhouse to be a catalyst for change - supporting regeneration, providing jobs and workplace opportunities but more importantly to be a place for the people. This house and what it can do belongs to everyone.

“At first, in the early days I thought of our task at Wentworth Woodhouse as saving a house – an important house for the nation but it is more than that. In the first four years we have developed into an organisation that changes lives and supports communities and, by the way, we are saving a house as well.

“I think we can change more lives and that is why I have chosen this charity to support in my year and I am grateful to you for supporting me in this quest.

“Each year the Master Cutler launches a challenge where each company or organisation involved is presented with a cheque for £50. Once you cash the cheque you can use that money as seed funding to see how much more you can grow that initial £50 into or keep the cheque and we will raise even more money.

“Over the next six months each of the participants use that time to raise as much money as they can. Some organisations do several small challenges, like a cake bake and a sponsored walk and some organisations do a large challenge like walking the three peaks for sponsorship.

“Some do a large event like organise a golf day and tournament or organise a garden party.

“It does not matter what you choose to do, and you can decide what suits you best. Whatever you do choose to fundraise, the team here are happy to support your efforts, and I would like to thank all the businesses signing up to the Master Cutler’s Challenge 2023, which will help Wentworth Woodhouse to change more lives.”

Rob Shaw, Managing Director at Glu Recruit, who have already signed up to this year’s challenge, added: “We’re thrilled to be taking part in this year’s Master Cutler’s Challenge.

“Wentworth Woodhouse Preservation Trust do so much for the local community, and we are excited to be able to give something back.

“We will be donating one per cent of all our permanent recruitment fees to Wentworth Woodhouse Preservation Trust, for the duration of the challenge.

“The whole team have already started brainstorming fundraising ideas and I’m excited to share them with our network – hopefully inspiring other businesses along the way.”

Money raised will go towards the Trust’s activities supporting low-income families, ethnic and minority groups and people with disabilities, including the creation of a Community Growing Garden.

Situated on the Drying Green, where for centuries laundry maids pegged bedlinen out to dry, a fully accessible space will feature raised growing beds, polytunnels and greenhouses.

Up to 20 local community groups will be able to grow their own food, develop gardening skills and friendships.

There’s still time to join the Master Cutler’s Challenge. Contact mastercutler@ wentworthwoodhouse.org.uk