By now you might’ve heard a few stories about Employee Ownership Trusts (EOTs). They’re everywhere—from glossy business features to pub garden chat among the self-employed. But like anything that gains traction, EOTs come with a few myths attached.
So, let’s separate the solid from the shaky.
Myth 1: “It’s just a tax dodge.”
Reality:
Yes, there are tax benefits. The seller may not pay Capital Gains Tax, and the company can pay employees up to £3,600 a year in tax-free bonuses. But that’s not the whole story—and it’s certainly not the whole motivation.
HMRC doesn’t hand out generous reliefs for nothing. There are real requirements:
- The trust must hold a controlling interest (over 50%).
- All employees must benefit equally (no picking favourites).
- The company must be actively trading.
If you’re looking to shift profits without substance, this isn’t your route. But if you want to hand over a healthy business and build a legacy, EOTs are worth a serious look.
Myth 2: “The employees take over running the company.”
Reality:
No. The company still has a board, a managing director, and a leadership team. Employees don’t suddenly start voting on supplier choices or salary bands.
The trust (not the employees directly) owns the company on their behalf. Trustees are appointed (usually a mix of internal and independent people), and they make sure the business is run in the best interests of the employees.
It’s more about protection and benefit, not a free-for-all democracy.
Myth 3: “Only big, wealthy companies can afford to do this.”
Reality:
EOTs work for all shapes and sizes. Many small and mid-sized firms have made the switch successfully—particularly where the team is tight-knit and the owners want to protect the business culture.
You don’t need a seven-figure turnover. You do need:
- Consistent profits.
- Realistic expectations on sale price.
- A team willing to stay and drive things forward.
And yes, if you’re selling to the trust, you might be repaid from future profits over time—not all upfront.
Myth 4: “You lose control the moment the EOT is set up.”
Reality:
If you’re retiring and want a clean break, fine. But many founders stay involved as directors or consultants for a few years after the sale. You can still lead the business, mentor the team, and steer the ship—without owning it.
In fact, a phased handover is often encouraged. It gives everyone time to adjust and keeps the business stable during the transition.
You’ll have sold your shares, but that doesn’t mean you’ve vanished in a puff of smoke.
Myth 5: “It’s all too complex – we’d never manage it.”
Reality:
Is it more complex than just selling your shares to one person? Yes.
Is it unmanageable? Absolutely not—with the right advice.
We build EOTs step by step with our clients. That includes:
- Drafting the trust deed and sale agreement.
- Helping choose trustees and set up the right governance.
- Working with your accountant to make sure the numbers stack up.
Done properly, an EOT doesn’t make your business harder to run—it gives it a structure that protects its long-term health.
Still Got Questions?
That’s normal. These are big decisions, and it’s right to take your time. If you want straight answers—not sales pitches—we’re always up for a coffee and a chat (in person or on Zoom, biscuits optional).
Because that’s how we work at TS Partners: grown-up advice, plainly put, with your business at the centre of it all.