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UK Budget – our views on taxes and employee share ownership

Insight 3 March 2021

UK Budget – our views on taxes and employee share ownership

The UK Chancellor of the Exchequer has announced a tapered increase to corporation tax from April 2023 and delayed any changes to capital gains tax to a future Budget. This, however, raises questions on future planning, restructuring of companies and shareholders looking to sell or transfer their respective holdings into more tax-efficient vehicles.

Trusts have long been a vehicle for facilitating employee ownership of companies, and legislation introduced in 2014 resulted in a new form of employee trust in the form of Employee Ownership Trusts (EOTs). Subject to meeting certain qualifying conditions, shareholders who sell their shares to an EOT can benefit from full CGT relief. Companies controlled by an EOT are also able to pay a limited amount of tax-free bonuses to each employee of the company per annum.

There are extensive reasons why EOTs may be a suitable option for individual companies, group companies and LLPs. Please contact Sanne’s Shervin Binesh or Sandra de Sousa for more information if you are interested in establishing employee ownership structures, or for the future planning and structuring of your company.

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