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.