Case study
Choosing an Employee Ownership Trust sale, and adding EMI afterwards
At a glance
- Client: an international financial and investment management group valued at around £3.5m
- Decision: an EOT sale, chosen over an MBO after months of discussion
- Rules: the EOT conditions and each change to the legislation were tracked throughout
- Timing: completed before the November 2025 changes to the EOT rules
- After completion: an EMI scheme, with an HMRC valuation agreement and no harm to the EOT's qualifying status
The client
The shareholders of an international financial and investment management group had owned and managed it for over 40 years. They found retirement hard to plan for, so the process ran long and changed direction several times.
The challenge
An EOT sale has to meet the qualifying rules, and those rules moved during this project. Changes to Capital Gains Tax, Business Asset Disposal Relief and the EOT legislation meant the structure and the clearance application had to be revisited as the deal progressed.
What we did
- Set out the choice. We presented an options proposal comparing an MBO with an EOT sale, and advised through several strategy meetings.
- Followed the EOT rules as they changed. We assessed what each change meant for the deal.
- Advised on timing as the rules changed. We kept the timetable under review as the EOT legislation moved, and the sale completed before the November 2025 changes took effect.
- Cleared the deal with HMRC. We prepared the clearance application and amended it as the law changed.
- Protected the tax position in the contract. We reviewed the Share Purchase Agreement with the solicitors.
- Added EMI after completion. We obtained an HMRC valuation agreement and designed the scheme so that it did not compromise the EOT's ongoing qualifying status.
The outcome
The EOT sale completed as planned, before the November 2025 changes to the rules took effect, with HMRC clearance on an application we updated as the law changed. The EMI scheme followed after completion, with an HMRC-agreed valuation, and it sits alongside the EOT without affecting its qualifying status.
Read the full case study on ASWATAX: https://www.aswatax.co.uk/resources/eot-sale-and-emi-for-an-international-investment-management-group
FAQs
Why compare an EOT sale with a management buy-out?
The shareholders had owned the group for over 40 years and wanted a way to retire. We put an MBO and an EOT sale side by side in an options proposal. After months of discussion, they agreed an EOT sale was the most appropriate succession solution.
How did the changes to the EOT rules affect the timing?
The EOT rules changed more than once during the project. For disposals on or after 26 November 2025, Capital Gains Tax relief on a sale to an EOT is 50%, where it was previously 100%. We advised on the timing throughout, and the sale completed before those changes took effect.
Why did the HMRC clearance application need amending?
The tax legislation changed during the project. We prepared the clearance application and then amended it in line with the changes.
Can an EMI scheme sit alongside an EOT?
In this case, yes. After completion we designed and implemented an EMI scheme and obtained an HMRC valuation agreement. We made sure the scheme did not compromise the EOT's ongoing qualifying status.
How was the group valued?
We prepared the valuation using a recurring revenue methodology.
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