An Employee Ownership Trust (EOT) is a third succession route alongside a trade sale or passing the business to family. You sell your shares to a trust that holds a controlling stake for employees generally, usually paid in instalments rather than a lump sum. Where the qualifying conditions are met, the sale can be free of Capital Gains Tax, with no cap equivalent to the £1m Business Asset Disposal Relief limit on trade sales. Employees can also receive tax-free bonuses of up to £3,600 a year once the trust is in place.
An EOT avoids the bidding and due diligence of a trade sale, but proceeds arrive over years, not upfront. It removes the need for a willing next generation, unlike family succession, though it does not replace the Inheritance Tax planning that a family transfer, or EOT sale proceeds, still require. EOTs suit established, team-led businesses rather than owner-dependent ones, and the proceeds still need building into a proper estate plan.