Britain’s employee ownership movement is experiencing a slowdown after a decade of rapid expansion, following new tax rules introduced in last year’s Budget. Changes aimed at closing loopholes for offshore trusts used to avoid capital gains tax (CGT) have reduced the number of business owners selling to their staff.
The Employee Ownership Association (EOA) reports that company sales to employee ownership trusts (EOTs) fell from 550 in 2024 to just 200 in the first eight months of this year. The total for 2025 is now expected to reach around 350, representing a decline of more than a third.
HM Revenue & Customs (HMRC) figures, obtained by accountancy firm Price Bailey, confirm the trend. Only 104 EOTs were approved in the three months to June, the lowest level since early 2022.
Experts attribute the drop to reforms designed to prevent some sellers from exploiting tax advantages. Previously, owners could transfer companies to offshore EOTs and have trustees resell them quickly, allowing the original owners to benefit tax-free. The new rules ban offshore structures and introduce a four-year “clawback” clause, meaning sellers could lose their CGT exemption if the company is sold within four tax years, up from one.
James de le Vingne, chief executive of the EOA, said the slowdown highlights the need to better align employee ownership succession with business support and regional growth plans. “Despite a decade of learning, education and insights driving growth, greater alignment is still needed to unlock the full opportunity of people-powered growth,” he said.
EOTs, launched in 2014, were designed to promote shared ownership similar to the John Lewis model. They offer 100 percent CGT relief to sellers passing control to their employees. Since then, the number of trusts has grown to around 2,500, including well-known companies such as The Entertainer, Go Ape, and Richer Sounds.
Robert Postlethwaite, founder of Postlethwaite Solicitors, said the new rules had cooled activity but noted that long-term prospects remain positive. “Some owners used EOTs purely as a tax-efficient exit — that’s no longer the case,” he said. “Those now pursuing employee ownership tend to be genuinely committed to it as part of their company’s future.” He expects activity to rise again as more business owners approach retirement.
Simon Blake, a partner at Price Bailey, described the reforms as “the most consequential change to the EOT regime since its introduction,” adding that the four-year rule “fundamentally alters the risk calculus, transforming what was once a frictionless exit into a compliance marathon.”
Despite the slowdown in conversions, the EOA continues to grow, adding 210 new members in the year to September. Professional, scientific, and technical sectors accounted for the largest share of new entrants, followed by IT, manufacturing, and construction, showing that interest in shared ownership remains strong even as tax incentives have diminished.
