How to Become an Employee Ownership Trust (EOT)

For business owners looking to safeguard their legacy, reward employees, and maintain the cultural identity of their company, EOTs provide a compelling alternative to trade sales or private equity exits.

The EOT model is increasingly recognised as a route to responsible capitalism — combining fair outcomes for business founders with long-term security and motivation for employees. At Ison Harrison, our team offers end-to-end legal and strategic support, helping businesses assess feasibility, complete the transition, and thrive under employee ownership.

What is an Employee Ownership Trust?

An Employee Ownership Trust (EOT) is a specific form of trust that enables a company to be owned indirectly by its employees. Instead of each employee holding individual shares, a trust is created which acquires and holds a controlling interest (at least 51%) in the company for the benefit of all employees collectively.

This structure promotes inclusive governance and sustainable growth, aligning the long-term success of the business with the interests of its workforce. EOTs are designed to preserve a company’s independence, reinforce its founding values, and promote engagement at all levels of the organisation. For outgoing owners, it offers a structured, dignified and tax-efficient exit.

Why Choose the EOT Model?

Succession Planning

EOTs offer a practical and ethical exit strategy for business owners who want more than a commercial transaction. Rather than selling to an external buyer — who may change the business model, relocate jobs, or focus on short-term returns — an EOT keeps control within the business. This allows continuity of leadership, retention of local jobs, and preservation of company values. It’s particularly attractive for founders who are embedded in their communities or industries and wish to see their work endure.

Engaged and Motivated Employees

When employees have a genuine stake in the business, their commitment often deepens. With ownership comes a sense of responsibility and pride, leading to measurable improvements in morale, productivity and staff retention. Employee-owned businesses frequently report lower absenteeism, higher customer satisfaction, and better staff recruitment outcomes. Through the EOT, employees become beneficiaries in the truest sense — not just of profits, but of purpose.

Tax Advantages

The EOT model is supported by generous tax reliefs, including:

• Capital Gains Tax (CGT) relief on the sale of shares to the EOT, provided the trust acquires a controlling interest and meets other qualifying conditions.
• Income Tax relief on employee bonuses of up to £3,600 per annum (as at current rates), available to all eligible employees on an equal basis.

These incentives offer significant financial advantages for both outgoing owners and employee beneficiaries, making the EOT route both principled and commercially attractive.

Business Stability and Independence

The EOT model helps protect the business from short-termism, hostile takeovers or disintegration post-sale. Decisions are driven by long-term interests rather than quarterly targets, and the business remains anchored in its original purpose. This continuity benefits clients, staff and stakeholders alike — providing reassurance that the company will evolve without losing its soul.

Flexibility Across Sectors

EOTs are not limited to any particular industry or company size. From law firms and digital agencies to engineering firms and consultancies, businesses across the UK are embracing the model. Whether you employ ten or several hundred people, an EOT can be adapted to your circumstances and growth trajectory.

How Ison Harrison Can Help

We combine corporate, tax and employment law expertise to deliver integrated, commercially focused support throughout the EOT journey. Our services include:

• Feasibility reviews and strategic planning
• Legal structuring and trust implementation
• Corporate governance and shareholder matters
• Valuation coordination and funding strategy
• Tax compliance and HMRC engagement
• Employee communications and bonus scheme design
• Post-transition advisory and governance support

We work closely with your accountants, funders and HR professionals to ensure a smooth, well-planned transfer of ownership that benefits all parties.

If you’re considering an Employee Ownership Trust, our Corporate & Commercial team is here to help. Whether you’re in the early stages of planning or ready to implement, we offer pragmatic, joined-up advice that puts your goals first.

Contact us today on 0800 232 1620 to arrange a free, no-obligation consultation.