Running or supporting an Employee Ownership Trust (EOT) comes with serious legal and financial responsibilities.
From 30 October 2024, changes to legislation clarified the expectations placed on EOT trustees. If you’re part of an EOT structure—or thinking about becoming one—it’s important to understand what the law now requires.
Here’s what you need to know.
1. The EOT Must Be UK Tax Resident
- An EOT must be a tax resident in the UK.
- It’s no longer possible to base the trust offshore.
This ensures the trust operates under UK law, with proper oversight and transparency. If your EOT was set up before 30 October 2024 and is based outside the UK, you’ll need to review and address this.
2. Founders Can’t Hold Majority Control of the Trustee Board
The Trustee Board must now be genuinely independent.
Founders and their close family members can no longer make up 50% or more of the EOT trustee body.
This is particularly important in structures where a UK company limited by guarantee acts as the trustee, and individuals sit as directors. Going forward, those directors must include a majority who are independent of the original owners.
It has always been best practice for former shareholders not to control the EOT, however this provision is now explicit, and is designed to keep control in the hands of the employee beneficiaries—not allowing former shareholders to continue to expert control.
Need help reviewing or setting up your trustee board? Read our guide to EOT trustee board structure for practical tips and examples.
3. Duty to Pay a Fair Market Value
Trustees now have a legal duty not to overpay for shares in the trading company, and not to agree to non-commercial interest rates on any deferred payments.
You must take all reasonable steps to secure a fair deal for the trust—and that means seeking an independent professional valuation.
It’s no longer just best practice; it’s a legal responsibility. A fair and defensible market value helps protect the tax-advantaged status of the EOT and ensures employees aren’t left with inflated debt post-deal. The business tax accountant can be too close to the company to do this. vfdnet Fractional FDs have years of experience valuing businesses fairly and honestly.
What Trustees Must Do
These updates make it crystal clear: EOT trustees have a duty to act responsibly, transparently, and in the best interests of employees. That includes:
- Ensuring the trust is UK tax resident
- Maintaining a balanced and independent trustee board
- Paying fair market value for shares, backed by independent advice
- Keeping clear records of all decision-making and due diligence
Need Expert Help? Let’s Talk
At vfdnet, we support business owners and EOT trustees through every stage of the process.
If you need:
- Help to restructure your trustee board.
- A trusted partner to provide an independent valuation or review a professional valuation.
- Ongoing guidance on EOT compliance and financial responsibilities.
We’re here to help you get it right, legally and ethically.
Get in touch with vfdnet – set up a call with James Shand to protect your EOT’s tax status, governance, and long-term success.
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