After a decade of rapid growth, the British identity movement is hitting 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 for the benefit of SideSTEP
The Adat Aurthership Association (EOA) reports that the company’s sales to employees of the company of employees (eots) fell by 550 in the year 2024 to 200 in the first eight months of this year. The total is now expected to reach 350 by 2025 – a decline of more than a third.
New figures from HM Revenue and Customs, obtained by accountancy firm Bailey, back up the trend. Only 104 eots were cleared by HMRC in the three months to June, the lowest rate since the start of 2022.
Experts say the decline follows changes designed to close tax loopholes used by some retailers. In the past, the owners of the company can transfer their businesses to international eots, the managers of which quickly sell the company to another buyer, allowing the original owners to pocket the tax.
The Government’s new rules now ban offshore properties and introduce a four-year “affected” clause, which means sellers lose their CGT if the company is sold for four full tax years – from one.
James de Le Le Vingne, CEO of the EOA, said that the Slowdown “serves as a reminder that despite ten years of study, to keep up with the growth of regional identity with the support of business and population growth.”
EOTS were first introduced in 2014 to promote John Lewis’ shared ownership model, which offers 100 per cent support to retailers who outsource their staff. Since then, the number of such trusts has increased from a few hundred to 2,500, including well-known firms such as entertainment, accer and rich sounds.
Robert Postlethwaite, the founder of postlethaite solicitors and a leading expert on employee ownership, said that while the new rules had a cooling effect, the long-term picture continued to be positive.
“Some owners have used eots as a tax-efficient way – no more guilt,” he said. “Now those who pursue employee ownership are often genuinely committed to being part of their company’s future, rather than simply looking for a tax-free escape.”
He expects the pace to pick up again as more business owners talk about retirement: “There are so many companies that need a succession solution, and eots will always be an important option.”
Simon Blake, partner at Prista Bailey, described the latest changes as “the most significant change to the EOT regime since launch,”
Despite declining conversions, the EOA continued to expand, adding 210 new members in the year to September. The active, scientific and technical sectors accounted for the largest share of new owners, followed by them, manufacturing and construction – proof that, while the tax breaks may be generous, the interest in joint ownership remains strong.
