Savvy business owners can make big tax savings by expanding their options when the time comes to step away from their businesses; here's how...
Owners of smaller companies, qualifying for Business Asset Disposal Relief, proportionally pay less CGT, however companies with higher valuations can expect a tax bill closer to 20%, losing nearly a fifth of their equity cake.
In the context of tax, the old saying is true, “You can’t have your cake and eat it”; or can you?
Expand your options...
Employee ownership trusts, regularly outperform selling on the open market and we believe employee ownership should be considered by every shareholder contemplating succession; here’s why…
Tax Free:
Rather than selling your business to an outside investor, your business can be sold to your employees' tax free with a 98% rate of success. Any excess cash forms part of the consideration and is distributed tax free on day one.
Selling to your employees does mean that you can truly have your cake and eat it.
Flexible:
Employee ownership gives you the opportunity to structure the terms of the transaction to suit your situation. You can proceed at your own pace and continue serving as a trustee, director, or employee or step away entirely.
Ethical:
When the ownership of your business transfers to your employees, it transitions from an autocracy to a democracy. Employee representatives are elected to the board of trustees and board of directors preserving some legacy company values and values important to employees moving forward. Employees are eligible for tax free bonuses up to £3600 per annum.
How it Works:
In 2014 the UK government recognised that employee ownership delivered increased productivity and employee engagement, contributing to a stronger economy.
To encourage the growth of employee-owned companies, Employee Ownership Trusts (EOT’s) were introduced, benefiting from generous tax incentives.
Employees use company profits to acquire a majority stake. The shares are held in trust for the benefit of the employees, similar to the John Lewis model.
For more detail, watch our video explainer below.
Employee ownership delivers all the benefits of having sold your business and more, including getting your time back. In addition, you can make sure your business is heading in the right direction before saying goodbye completely.
Keep your options open…
Our combined service allows vendors to keep their options open by exploring a trade sale first, with the option of switching to employee ownership later, should a trade sale fail to meet expectations.
If there’s a downside to employee ownership, it’s that you generally wait longer for your sale proceeds when compared to selling to an outside acquirer. If you operate in a particularly buoyant sector which commands inflated valuations, selling to an outside investor could compete with the tax advantages afforded by employee ownership trusts.
The Combined Service is fast and efficient, delivering a 98% rate of success, allowing vendors to switch to employee ownership seamlessly without incurring additional fees.
Call us on 01384 274 778 / 075 888 925 88 to discuss or go ahead and book a free consultation to discuss your options.