The majority of planned corporate “Exits” by Owner Directors since April 2020, have been via EOTs, Employee Owned Trusts, which potentially are subject a 0% Capital Gains Tax Rate.

Before April 2020, subject to meeting certain criteria, directors and shareholders could sell their shares and take advantage of the Entrepreneurs Capital Gains Tax Rate of 10% on gains up to a lifetime limit of £10m.  A £10m capital gain would only have been subject to £1m of taxation.  This tax break was renamed “Business Asset Disposal Relief” and the lifetime gains limit was reduced from £10m to £1m, thus exposing the other £9m of gain to capital gains taxes of 20% or more.

Employee Ownership has tripled in the UK since 2020. There was a record 285 new EOTs in 2021, which beat the previous annual record of 148 new EOTs set in 2020.

These statistics are extracted from research conducted by Employee Ownership Association (EOA) research partners; Professors Andrew Robinson (University of Leeds) and Andrew Pendleton (UNSW) of the White Rose Centre for Employee Ownership.

Employees can earn tax free annual bonuses from an EOT of up to £3,600 per year. These payments would still be subject to National Insurance.