Myths About Employee Ownership Trusts: Separating Fact from Fiction

The Employee Ownership Trust (EOT) has grown in popularity as a succession solution — particularly among business owners looking to exit while preserving their legacy and rewarding their team. But with growth comes confusion, and we often hear the same myths repeated during initial conversations with shareholders.

At EOT.co.uk, we believe in cutting through the noise. Below, we separate fact from fiction to help you understand what the EOT model really offers — and what it doesn’t.

❌ Myth 1: “You have to give the business away.”

✅ Fact: EOT sales are paid transactions — often at full market value.

One of the most common misconceptions is that selling to an EOT means giving the company to the employees for free. Not true. In most cases, the EOT pays the outgoing shareholders fair market value, usually in instalments funded by the company’s future profits. It’s a commercial exit — not a donation.

❌ Myth 2: “The tax benefits sound too good to be true.”

✅ Fact: The 0% capital gains tax relief is legitimate — and HMRC-approved.

UK legislation introduced in 2014 allows qualifying shareholders to sell their business to an EOT completely free of capital gains tax. This is not a loophole — it’s an intentional incentive to promote wider employee ownership. The key is meeting the criteria. We ensure every EOT project we manage includes formal clearance from HMRC, giving both the seller and the business peace of mind.

❌ Myth 3: “The employees have to run the business.”

✅ Fact: Employees don’t manage the business — leadership stays in place.

An EOT does not mean handing day-to-day control to a staff committee. The company continues to be run by its management team, just as before. The EOT becomes the majority shareholder, but directors still lead and make decisions. It’s a cultural shift — not a takeover.

❌ Myth 4: “An EOT is only for small lifestyle businesses.”

✅ Fact: EOTs work for companies of all sizes — from £1M to £50M+ turnover.

We’ve supported EOT transitions across a wide range of sectors and deal values. From professional services firms and manufacturers to tech companies and retailers, the EOT model is flexible enough to work at scale — provided the business has strong trading fundamentals and sustainable cash flow.

❌ Myth 5: “Selling to an EOT is second best to a trade sale.”

✅ Fact: For many owners, an EOT delivers a better overall outcome.

While trade sales can bring big upfront payments, they also involve loss of control, external demands, earn-outs, and integration risk. Many sellers find the EOT route offers a fair value, strong cultural fit, continuity for staff, and a clean, tax-free exit — without needing to hand the reins to a competitor.

❌ Myth 6: “You lose control of the business immediately.”

✅ Fact: You can stay involved for as long as you like — or step away.

The transition to employee ownership is designed to be flexible. Many business owners remain involved post-sale, either as directors, consultants, or even just as mentors. Others step away immediately. It’s up to you — and part of the planning process.

Final Thoughts

The EOT isn’t a miracle solution, and it’s not right for every business. But it is a powerful, proven route for owners who want:

• A full-value, tax-efficient exit

• To preserve the culture and legacy they’ve built

• To reward and empower the team who helped them succeed

If you’re exploring exit options, don’t be swayed by myths or misinformation. Speak to specialists who live and breathe employee ownership.

Considering an Employee Ownership Trust?

Book a confidential discovery call with the team at EOT.co.uk. We offer independent feasibility reviews, step-by-step guidance, and full support through the transition — from first conversation to HMRC clearance and completion.