Common EOT Myths: Separating Fact from Fiction

The Employee Ownership Trust (EOT) has become one of the most talked-about business succession options in the UK — and for good reason. It offers a tax-efficient, fair, and sustainable route for owners to exit while rewarding the people who helped build the business.

Yet as the model’s popularity has grown, so too have the myths. From “it’s only for big companies” to “you have to give your business away,” misinformation often stops owners from exploring what could be their best exit route.

At EOT.co.uk, we help business owners make informed, confident decisions. Let’s separate fact from fiction and uncover the truth behind the most common EOT myths.

Myth 1: “EOTs are only for large companies”

Fact: The EOT model works for businesses of all sizes — from 10-person firms to those with hundreds of employees.

What matters most isn’t the size, but the profitability, stability, and structure of the business. A healthy, sustainable company with an engaged team can transition successfully to employee ownership, whether it’s a £1 million or £100 million turnover business.

Myth 2: “You have to give your business away”

Fact: You sell it — usually at full market value.

Under an EOT, the business is sold to a trust that holds shares on behalf of the employees. The transaction is properly valued by an independent professional, and the former owner receives payment — typically from the company’s future profits over an agreed period.

It’s a commercial sale, not a gift. The key difference is who ultimately benefits: your employees, not external investors.

Myth 3: “You’ll lose control immediately”

Fact: Most sellers stay involved during the transition.

An EOT doesn’t mean you walk out on completion day. Many owners remain in executive or advisory roles for a defined period to ensure stability.

Ownership transfers to the trust, but leadership can remain with the same management team until the next generation is ready. The structure provides continuity and security for everyone involved.

Myth 4: “EOTs are a tax dodge”

Fact: The EOT tax reliefs exist to promote long-term employee ownership — not avoidance.

When properly structured, a qualifying EOT sale allows the selling shareholders to benefit from 0% Capital Gains Taxon the sale of their shares.

However, the rules are clear and HMRC-compliant. The sale must meet specific ownership and participation criteria, and the process must be independently valued and verified.

Handled correctly, an EOT is one of the most legitimate and government-endorsed exit strategies available to UK business owners.

Myth 5: “Employees run the business directly”

Fact: Employees become beneficial owners — but governance remains structured and professional.

The trust owns the shares on behalf of all employees, but daily management remains with the leadership team.

A trustee board represents employee interests and ensures the company is run in their long-term benefit. It’s a balance between employee voice and commercial discipline — not a committee-led free-for-all.

Myth 6: “EOTs don’t work if staff leave”

Fact: Employee ownership is collective, not individual.

Even if employees move on, they don’t “take their shares” with them. The trust retains ownership, and new employees automatically become beneficiaries. This keeps the structure stable and future-focused, no matter how the team evolves.

Myth 7: “It’s too complex and expensive”

Fact: While an EOT involves careful planning, it’s no more complex than a traditional business sale.

With the right advisers — including legal, valuation, and trustee specialists — the process can often be completed in a matter of months.

The cost is typically a fraction of the long-term value protected through continuity, tax savings, and retained talent.

Myth 8: “EOTs limit future growth or flexibility”

Fact: EOT-owned companies continue to grow, innovate, and even acquire other businesses.

Employee ownership doesn’t restrict ambition — it often enhances it. Studies show employee-owned companies outperform their peers in productivity, resilience, and staff retention.

The structure promotes stability, long-term thinking, and alignment between leadership and employees.

Final Thoughts

The Employee Ownership Trust isn’t a shortcut or a tax trick — it’s a proven model for fair succession, cultural continuity, and shared success. For the right business, it offers a unique way to protect your legacy, reward your team, and exit with pride and purpose.

If you’re exploring your succession options and want to understand whether an EOT could be right for your business, we can help.

Contact us today to arrange a confidential discussion about your next steps.