CGT Update: eoa Continues to Press EOT Asks with Government 

The eoa continues to press Employee Ownership Trust asks with Government on behalf of our members following the reduction in CGT relief. 

Image: Getty Images

The eoa has been working behind the scenes to gain clarity and improvements to applying the updated Capital Gains Tax (CGT) relief in Employee Ownership Trusts (EOTs) announced in the Autumn Budget.  

“We’re continuing to work with - and fight on behalf of - our members to ensure potential new employee owned businesses have a clear and workable EO succession plan via the EOT. This is essential to encourage growth of the sector and propel EO into the mainstream,” said our Chief Executive, James de le Vingne.  

“The more employee owned businesses there are, the louder our voice, and the more compelling evidence we develop of a model that drives benefits for our communities and the economy.” 

How Have We Been Influencing Government? 

We’re regularly engaging with HMRC, HM Treasury, and the Department for Business and Trade teams.  

We’re also an active member of the Mutuals and Co-operatives Sector Business Council, which is working to double the sector, and we recently submitted a comprehensive response to the call for evidence with input from our members. 

Updated HMRC Guidance 

We have three clear priorities we’re working to progress with HMRC: 

1. Updated guidance to provide clarity on how the new EOT tax relief is applied
2. A bespoke approach to paying CGT in instalments that works for EOTs
3. Small fixes to the 2024 rules that now create a disproportionate risk to vendors 

One of the key issues where our talks are progressing well is on the request to update HMRC guidance.  

Without clear direction on how the tax is paid, businesses considering transitioning to employee ownership face uncertainty, which could delay or even prevent new EO businesses from forming.  

HMRC has indicated they plan to update guidance within the existing legislation and will be taking our detailed feedback on board to inform this.  

We don’t have a timescale for when this will happen, but we’ll continue to liaise closely to try to get a firmer commitment. 

We’re also working with the Co-operative Party to encourage MPs to raise questions in parliament asking ministers to commit to updated HMRC guidance and a more EO friendly treatment for CGT by instalments (under section 280 of the Taxation of Chargeable Gains Act 1992 in cases involving disposals to EOTs).  

Template Letter to Request Payment in Instalments 

Our International Ambassador, Graeme Nuttall, has drafted a template letter for advisers to use when requesting paying tax in instalments. 

Whilst HMRC are unable to give formal approval to third party templates, they’ve confirmed the letter covers all required information and is therefore an acceptable format to submit section 280 requests following disposal to an EOT to HMRC.   

eoa Supporter members can access the template letter in the eo Hub*. 

Monitoring Transitions

We’re collecting data from professional advisers about the number of transition deals they’re working on post-Budget. This provides evidence on whether CGT changes are impacting transitions, which further strengthens our case for a policy review.  

A short survey has been piloted with our Specialist Advisors and we’re now inviting all Supporter members who advise on EO transitions to submit this information to us on a quarterly basis.  

Supporter members can access the survey link in the eo Hub*.

Despite the sudden change to the relief putting some live transitions on pause while we sought guidance from HMRC, early indications from the small sample we’ve collected to date, show a fairly positive picture for transitions. 

We’ve seen the first post-Budget transitions completing recently, evidencing that employee ownership remains a favourable option for founders looking to exit a business and protect their legacy, with just 12% tax to pay.  

In light of this, we’re hopeful we can ensure the model will support us to welcome more businesses into the thriving employee ownership sector. 

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*Members will only be able to access these links if they're signed up to the eo Hub and are a member of the advisor community. If you need help accessing the links, please email [email protected].