Employee Ownership - A succession strategy
Employee Ownership is the fastest growing form of business ownership in the UK. Business owners planning retirement are increasingly favouring an exit route which recognises the contribution made by the employees to the growth of the business, and safeguards the core business culture and ethos for the future.
It is also now widely recognised that greater employee engagement directly benefits productivity, often as cited as “the John Lewis effect”.
What does Employee Ownership involve?
Employee Ownership involves the ownership of a significant part of the business held through an Employee Ownership Trust (or EOT). All the employees must be entitled to benefit from the trust, though entitlements can be flexed on certain criteria such as length of service.
Generally, employees who have less than 12 months service can be excluded, and employees who are significant shareholders in their own right are also excluded from benefitting from the trust.
What are the tax advantages?
Significant changes to the tax rules have also made the sale of a business to an EOT a far more attractive proposition. Where business owners (being individuals) dispose of their shares to an EOT (such that the EOT holds a controlling interest in the company), no capital gains tax will be payable.
Furthermore, employees of a company owned by an EOT will be able to benefit from an income tax exemption on bonus payments of up to £3,600 per employee.
Why Turner Parkinson?
Turner Parkinson is a specialist law firm in advising businesses looking to move to Employee Ownership. We are a member of the Employee Ownership Association, and, since 2013, the team have worked with over 15 businesses which have transitioned to Employee Ownership.
We provide legal advice to some of the most active funders in the Employee Ownership sector helping them to implement Employee Ownership structures and outcomes for their clients.
Want to know more? Please contact Stephen Hadlow.