If you’re thinking about whether you can sell your business to an Employee Ownership Trust (EOT), our quick, four question checker will help you determine if your company meets the criteria for sale to an EOT and qualifies for the associated tax benefits.
You don’t need to prepare. You just need basic information about your company structure, employee numbers, and shareholding details.
Company status
To qualify for the EOT tax perks the shares need to be sold by individual(s). If your trading company is owned by a holding company, and you own the holding company, you will need to sell your shares in the holding company to qualify. Learn more on our help page.
What type of shares do you hope to sell to the EOT?
Controlling stake
For a valid EOT transition with the associated tax benefits, you must sell a controlling stake (minimum 51%) of your business. This means even if you remain a shareholder, you'll become a minority stakeholder subject to EOT governance. Learn more on our help page.
Will your EOT gain and retain a controlling stake (51%+)?
Profit sharing
In an EOT, all eligible employees must benefit equitably from the profit share. This doesn’t necessarily mean every employee receives the same amount of profit share – but the system must not favour individuals. You can learn more about how profit share can be split on our help page.
Will the staff profit share be equitable?
Participator ratio
To qualify for an EOT sale and associated tax perks, your business must comply with the participator ratio. Roughly speaking, you need at least five employees for every two shareholders. The correct participator ratio must be in place for at least 12 months before the date of the sale to the EOT. Add your information below and we’ll work out your ratio. You can find out more about this on our help page.
How many employees and shareholders do you have?
Something's not right. Please review the errors and try again.
Good news, your business qualifies
Sorry, your business doesn't qualify
Company status
You are selling shares owned by individual(s) to the EOT, which means your sale will qualify for the EOT tax benefits.
Unfortunately, your business does not qualify. The shares being sold to the EOT need to be in a trading company, or in the holding company of a trading group.
Companies can be structured in a variety of different ways. To get the tax benefits of selling to an EOT, the shares must be sold by individuals, not companies.
That means if the shares in the trading company (or in a holding company that owns the trading company) are owned by an individual, you qualify. But if the shares are currently owned by a company (e.g. a holding company owns the trading company), the sale won't qualify for the tax perks.
Find out more about how company status effects your eligibility on our help page.
Controlling stake
Your plan to transfer 51%+ ownership to the EOT meets the controlling stake requirement.
The EOT needs to gain a controlling stake in your business – at least 51% to qualify for the EOT tax benefits. You need to understand that you will be handing control of your business to the EOT. If you are determined to retain control, an EOT probably isn't the path for your business.
Learn about why the controlling stake is important on our help page.
Profit sharing
You’re planning a fair and equitable profit share. That’s one of the key criteria for an EOT sale.
To sell your business to an EOT, you must create an equitable profit share payments plan for staff, meaning you cannot single out individuals positively or negatively.
If you do press ahead, we can give clear guidance on what you can and can’t do with profit share payments.
Read more about profit sharing on our help page.
Participator ratio
Your participator ratio is . Your ratio needs to be 40% or under for your business to qualify.
Your business meets the ratio of employees to shareholders needed for an EOT sale.
This can become complicated, but at its heart, it’s about the number of shareholders compared to the number of employees. If you have relatives of shareholders on the payroll, or staff with share options, your ratio will be affected. Superficially, it looks like you fail to meet the required ratio to qualify, but it may be worth discussing with a professional to see whether this can be easily resolved.
Get the lowdown on the participator ratio on our help page.
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