Employee Ownership Trust glossary: every EOT term in plain English
How to Use This Guide
Core Glossary Terms
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Employee Ownership Trust (EOT)A legal structure that holds at least 51% of a company’s shares on behalf of all employees.
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TrusteeA person (or company) appointed to manage the EOT for the benefit of the workforce. Usually includes a founder, employee rep, and an independent member.
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Trust DeedThe formal legal document that outlines the rules and powers of the trust.
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Vendor FinancingWhen the sale of the business is paid for over time using future company profits, rather than all at once.
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Deferred ConsiderationThe part of the sale price paid to the seller in instalments after completion.
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Share Purchase Agreement (SPA)The legal agreement that sets out the terms under which the EOT buys shares from the business owner.
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Share Purchase Agreement (SPA)The legal agreement that sets out the terms under which the EOT buys shares from the business owner.
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Capital Gains Tax (CGT)The tax charged on profit when you sell shares. A qualifying EOT sale is exempt from CGT, making it 0%.
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Independent ValuationA fair market value of the business, typically calculated using EBITDA multiples or discounted cash flow (DCF).
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Employee Bonus SchemeA system allowing employees to receive up to £3,600 per year, income tax-free, once an EOT is in place.
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HMRC ClearanceAn optional but recommended process where HMRC confirms the transaction qualifies for CGT relief.
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Governance FrameworkThe rules by which the trust operates, including how decisions are made, how trustees are appointed, and how profits are shared.
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Real-World Example
Case Study: Apex Engineering Ltd60 employees, £8m turnover. The founder retired through an EOT. A fair market value was agreed via independent valuation. The sale price was paid over five years using vendor financing. Employees now receive £3,600 annual bonuses, and staff retention has increased 25%.
Examples
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Feasibility Review
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Independent Valuation
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Shareholding Structure
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Deal Structure
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SPA
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Deferred Consideration
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Vendor Financing
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Trust Formation
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EOT setup
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Trust Deed
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Trustee Appointment
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Governance Framework
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Tax Planning
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HMRC Clearance
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CGT Relief
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Post-Completion
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Employee Bonus Scheme
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Ongoing Trustee Support
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EOT Cheat Sheet: Key Terms at a Glance
Simple Definition
- EOT - Trust that holds employee-owned shares
- Trustee - Manager of the EOT
- SPA - Share sale agreement
- Vendor Financing - Deferred payment over time
- Trust Deed - Legal rules of the trust
- Deferred Consideration - Post-sale instalments to seller
- CGT - Tax on sale profit (0% with EOT)
- Bonus Scheme - Up to £3,600 tax-free/year for staff
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Final Step: Want to Know How These Terms Apply to Your Business?
If you’re thinking about selling your business to employees and want to understand how all of this works in practice, we offer free consultations with a senior EOT advisor.
- Call us: 020 8441 1140
- Email: eot@jla.accountants
- www.jla.accountants/eot-book-call
Produced by JLA — Trusted EOT Advisors UKClarity. Compliance. Confidence.
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Employee Ownership Trust: Glossary
Every EOT term in plain English. We’ll email it to you.
Updated September 2026 for the post-Budget tax position.
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Written by Parag Patel | Strategy and Tax Planning Consultant
Parag leads the Exit Better team at JLA Accountants, advising owners on employee ownership, succession and the tax that comes with both.
About the team