Employee Ownership Trust

The Employee Ownership Trust (EOT) is an indirect  form of employee ownership in which a trust holds a controlling stake in a company on behalf of all its employees and provides an incentive for owners to sell a controlling stake in their business.


The EOT was introduced in the Finance Act 2014 as part of the coalition government's aim of promoting employee ownership as a business model in the UK.

It was the result of recommendations put forward by Graeme Nuttall in his 2012 report commissioned by the Department for Business, Skills & Innovation. The Nuttall Review promoted the trust as a relatively simple means of achieving employee ownership, emphasising in particular the need for an 'off-the-shelf' model to appeal to business owners considering succession options.

The EOT was the government's response.


The EOT is an extension of the traditional employee benefit trust, but with distinctive features and tax advantages.

Crucially, an EOT must hold a controlling stake in its company and must benefit all employees on an equal basis.

The major tax exemptions:

  • A complete capital gains tax (CGT) exemption on gains made when a controlling interest in a company (or parent company of a trading group) is sold to an EOT.
  • An income tax (IT) exemption of £3,600 per tax year on certain bonuses issued to all employees (national insurance contributions are not exempt).

The CGT relief makes the EOT a particularly attractive option for business owners looking to sell their company. The alternative solution would be the sale of shares through conventional means, which after entrepreneurs' relief would result in a 10 percent CGT rate.

Meanwhile, the IT relief provides a substantial benefit for all employees. This not only provides an additional source of remuneration in addition to wages or salaries, it helps engender a culture of ownership and collective responsibility for the company's performance.

Further reading