The reduction in capital gains tax relief on disposals to Employee Ownership Trusts (EOTs) is a “significant shift” for succession planning for business owners, says top corporate lawyer.
Peter Turk, a specialist legal advisor to EOTs at regional legal and professional services business, Knights, has said a reduction in capital gains tax relief from 100% to 50% is not “entirely unanticipated” and the drop will still provide a “platform for growth” for business owners.
Speaking soon after the Chancellor, Rachel Reeves, delivered the Budget, Peter stated that he still expects EOTs to “continue to be an attractive option for many sellers”.
Peter Turk, Senior Associate in Corporate at Knights, said:
“Today’s announcement that capital gains tax relief on disposals to Employee Ownership Trusts (EOTs) will be reduced from 100% to 50% marks a significant shift.
“EOTs were introduced to promote diversity and engagement in the UK economy, so curbing measures that support employee ownership may seem counterintuitive. That said, instances of abuse have occurred, and so reform is not entirely unanticipated.
“Since they were introduced, EOTs have become an increasingly popular succession route for owner-managed businesses, offering stability for businesses and rewarding employees.
“While there is no doubt this change will affect their attractiveness, even at 50% the relief is still substantial compared to other exit strategies.
“Our advice has always been that EOTs only work when driven by a genuine belief in employee ownership as a platform for growth—not simply tax savings. We therefore expect EOTs will continue to be an attractive option for many sellers.”