Joan McCoy

Last month, Employee Ownership Association held its annual conference in Telford. Although the event offered valuable insights and into the power of employee ownership (EO), it was a speech delivered three hours away in Westminster that dominated discussion.

In what has been dubbed the “smorgasbord budget”, the Chancellor introduced several smaller tax rises. For the 850 founders, leaders and advisors in attendance, the most significant announcement was the decision to reduce the capital gains tax (CGT) relief available to those selling their businesses to an Employee Ownership Trust (EOT) with immediate effect.

Under the new rules, business owners selling to an EOT will now pay CGT on half of their gain rather than receiving the previous 100 per cent relief.

While this reduces the net proceeds available to vendors and introduces a CGT liability that must be funded, it does not eliminate the tax advantages of an EOT sale.

Importantly, the 50 per cent of the gain that is now taxable does not qualify for additional reliefs such as Business Asset Disposal Relief but even with this policy update, sellers can still access meaningful CGT savings when compared with a conventional third-party sale.

The Chancellor emphasised the need to maintain strong incentives for employee ownership, and this remains the case. Despite the reduced relief, EOTs continue to offer compelling benefits such as preserving company independence, protecting culture, anchoring firms in their local economy, and rewarding the employees who helped build them. For many owners, these long-term advantages outweigh the fact that an EOT sale is no longer entirely tax-free.

Some owners will understandably be disappointed by the reduction in relief. However, the core benefits of EO extend far beyond fiscal incentives. Once the initial reaction settles, most owners are likely to revisit the reasons that drew them to employee ownership in the first place. Advisors, particularly lawyers such as solicitors, will play an important role here by continuing to highlight the strategic, cultural, and community advantages that EOTs uniquely provide.

Any sudden policy change can create uncertainty, and business owners will need time to adjust. Our message is therefore simple: remain calm, reassess your objectives, and remember why employee ownership has become such a successful succession model. Most owners, after reviewing their options and evaluating the new CGT liability, will conclude that no other exit route provides the same combination of financial, cultural and legacy-focused benefits.

For advisors, the conversation will shift from presenting the EOT as a fully tax-free exit to describing it as a partially tax-advantaged one. They may also need to help clients recalculate repayment schedules or cash-flow projections to ensure the new CGT liability can be funded with certainty.

To support this transition, several tools and resources are already emerging. Employee Ownership Ireland has launched a comparison calculator that allows owners and advisors to compare CGT outcomes under an EOT sale versus a standard third-party sale. Webinars and in-person seminars planned for early 2026 will further clarify the new tax landscape and ensure decisions are based on accurate information, not headlines.

With the support of advisors, now is an ideal time to explore feasibility studies which are available to companies based in NI and may be funded by Employee Ownership Ireland, depending on certain criteria.

We want to encourage owners who care about legacy and culture not to be discouraged and consider how transitioning to employee ownership can future-proof businesses across these islands.

Joan McCoy is an architect and board member of Employee Ownership Ireland.