Could Employee Ownership Be Your Succession Solution?

For many business owners, succession planning is the nagging thought that plays on their mind frequently, but gets shoved aside amid the daily business of running the firm.

However, if you have spent years nurturing your company to success, you want to make sure that, when the time comes to step away from it, you leave it in the best hands.

Setting up an Employee Ownership Trust is the option many business owners decide upon. These trusts are a smart, modern solution for succession planning, particularly for those business owners who feel a strong duty of care for their employees.

The scheme sees a trust established to buy the owner’s shares, with the intention of owning them indefinitely for the benefit of the employees. The purchase can be funded by company contributions or by borrowing, before or after the sale. Clearly, this model is designed to create a sense of investment among employees and to boost morale, productivity and creativity, when it comes to supporting the ongoing success of the business. But, it does have a number of tax advantages too.

Because of a specific exemption in capital gains tax legislation, funds flow tax-free to the owner under the employee ownership trust model. Furthermore, a tax exemption for employees means they can enjoy a bonus of up to £3,600 per tax year, income tax free.

The qualifying conditions for these tax breaks are:

  • The Employee Ownership Trust must hold a controlling interest of more than 50 percent of the shares.
  • All employees must benefit on an equal basis.
  • There must be limited participation from previous shareholders.

Crucially, this model of business succession can also be implemented in a straightforward way, under tailored and specialist advice from an expert. Contact us today to find out how we can help you.

Other News

November 12, 2020
We are very proud to have supported another successful firm, Wavehill, to switch to an employee-owned model. The Aberaeron-based social and economic research company has made the transition in order to cement its team-orientated ethos and business approach.
November 6, 2020
There are many reasons why an increasing number of firms are opting to switch to an Employee Ownership model. The most important reasons often cited are: to ensure smooth business succession and to reward and engage a valued workforce. However, the fact that firms can benefit from Capital Gains Tax relief when they transition to Employee Ownership doesn’t go unnoticed.
November 2, 2020
Considering switching your business to an Employee Ownership model? You are not alone. More and more savvy business owners are opting for the EO structure, in order to reward their valued teams, create a clear path for succession and to benefit from tax incentives. If you are deliberating over the structure your EO scheme should take, here are some pointers.