After a decade of rapid growth, the UK workforce ownership movement is putting on the brakes. New tax rules introduced in last year’s budget have reduced the number of business owners selling to their employees following a crackdown on offshore trusts used to avoid capital gains tax (CGT).
The Employee Ownership Association (EOA) reports that corporate sales to employee ownership trusts (EOTs) have fallen from 550 in 2024 to just 200 in the first eight months of this year. A total number of around 350 is now expected for 2025 – a decrease of more than a third.
New figures from HM Revenue & Customs, obtained from accountancy firm Price Bailey, support the trend. Just 104 EOTs were approved by HMRC in the three months to June, the lowest level since the start of 2022.
Experts say the decline is due to reforms aimed at closing tax loopholes exploited by some sellers. Previously, company owners could transfer their businesses to offshore EOTs, whose trustees would quickly sell the company to another buyer, allowing the original owners to pocket the proceeds tax-free.
The government’s new rules now ban offshore structures and introduce a stricter four-year “clawback” clause, meaning sellers could lose their CGT exemption if the business is resold within four full tax years – rather than just one.
James de le Vingne, EOA chief executive, said the slowdown “serves as a reminder that despite a decade of learning, education and insights driving growth, greater alignment of employee succession with business support and regional growth plans is still required to unlock the full opportunity for people-led growth.”
EOTs were first introduced in 2014 to promote the John Lewis model of shared ownership and offer 100% CGT relief to sellers who hand control to their employees. Since then, the number of such trusts has risen from a few hundred to around 2,500, including well-known companies such as The Entertainer, Go Ape and Richer Sounds.
Robert Postlethwaite, founder of Postlethwaite Solicitors and leading employee engagement expert, said that while the new rules had cooled activity, the long-term picture remained positive.
“Some owners were simply using EOTs as a tax-efficient way out – that is no longer the case,” he said. “Those pursuing employee ownership now tend to be truly committed to making it part of their company’s future, rather than simply looking for a tax-free way out.”
He expects the pace to pick up again as more entrepreneurs retire: “There are so many companies that need a succession solution and EOTs will remain an important option.”
Simon Blake, partner at Price Bailey, described the latest reforms as “the most consequential change to the EOT regime since its inception”, adding that the four-year rule “fundamentally changes the calculation of risk – turning a once smooth exit into a compliance marathon.”
Despite the slowdown in conversions, the EOA has continued to grow, adding 210 new members during the year to September. The professional, scientific and technical sectors accounted for the largest proportion of new entrants, followed by IT, manufacturing and construction – evidence that while tax breaks are less generous, interest in shared ownership remains strong.
