Update On Employee Ownership Trusts

Having been with us for almost 10 years the Government has now launched a consultation on the taxation of Employee Ownership Trusts (EOTs) and other employee benefit trust arrangements. This is always a worrying sign particularly with an election looming in 2024. Some commentators are already predicting that a change of Government could result in the 0% capital gains tax benefit being restricted or even removed. We think this is unlikely but the outcome of the consultation will inevitably lead to some reform being made to the current tax regimes.

The growth in EOTs

It's perhaps not unsurprising that EOTs have become so popular. Little was heard about them until changes were made to "Entrepreneurs Relief" (now known as Business Asset Disposal Relief) in 2020, when the lifetime limit was reduced from £10million to £1million. Up to that point less than 50 companies had applied to HMRC for approval to convert to an EOT. That number increased to 100 in 2020, 383 in