Employee Ownership Trusts

Employee Ownership Trusts

A win-win for owner and employees 

Richer Sounds and Bromley Healthcare are two new additions to the growing number of employee-owned businesses. 

With 166,000 employees and £19.2bn sales, the top 50 employee owned companies are now a significant force. 

In the right circumstances, employee ownership can be an attractive way to sell a business, whilst at the same time safeguarding the future for the employees who helped to build it. 

Significant tax advantages can be secured for the current owner. Under certain circumstances it is possible to sell without incurring any capital gains tax. Reducing the tax payable at the time of sale can effectively increase the net proceeds received by the seller. 

Using an Employee Ownership Trust, your employees will own the shares via a trust, which provides a clear basis for ownership and stewardship. A tax advantage may also be available to the new employee/beneficiary owners. Tax-free bonuses of up to £3,600 a year may be paid to employee/beneficiaries. 

Th ethos of this arrangement is equitable treatment for all employees. This fulfils the intention of certain business owners who value the contribution employees have made to the success of the business. 

The employee ownership trust must acquire a controlling interest in the shares of the company. Some examples have transferred 100% of the shareholding. 

Financing of the purchase can be completed by third-party bank loans or via a loan from the existing owner/seller. 

As you would expect, there is complex series of tax and legal requirements to be fulfilled before this arrangement will gain HMRC approval. ad+ is delighted to confirm that our sister company has recently successfully completed an Employee Ownership Trust on behalf of a client and is in the process of completing two more. That experience, plus the necessary legal documentation which we have available, allows us to confidently help you assess this option for your business. 

Get in touch if you would like to arrange a confidential discussion with one of our tax advisors. 

#Employee Ownership Trust #Tax Planning #Sale of business