Insights · Employee ownership

EOT valuations explained: market value, relief and HMRC.

A sale to an Employee Ownership Trust (EOT) is still a sale, and the price still has to be justified. Since October 2024 the trustees carry a legal duty not to overpay, and since November 2025 the seller's relief covers only half the gain. This guide explains how an EOT valuation is put together and what a good report should show.

What an EOT is.

An EOT is a trust that holds a controlling interest, more than 50%, in a trading company for the benefit of all its eligible employees. The trust usually buys the shares from the existing owners and pays for them over several years from the company's profits. Qualifying sales attract capital gains tax relief for the seller, and employees can receive tax-free bonuses of up to £3,600 a year.

The market value rule.

For disposals on or after 30 October 2024, the trustees must take all reasonable steps to ensure the consideration they pay does not exceed market value. In practice that means commissioning, or at least reviewing, an independent valuation before agreeing a price, and keeping it on file. A price set by the seller alone, or by a single rule of thumb, is hard to defend.

How the value is worked out.

We use the same triangulated approach as any other independent valuation:

• Earnings multiple. Normalised EBITDA, adjusted for one-off costs and owner pay that will change after the sale, multiplied by a benchmark drawn from comparable transactions. See our UK multiples guide.
• Net assets. A floor value, and a check that the multiple is not overstating a capital-heavy business.
• Discounted cash flow. A cross-check using the forecasts the trustees will rely on to pay the deferred consideration.

Surplus cash is added and debt deducted to move from enterprise value to equity value. Where the trust buys less than 100%, the report should explain whether a control premium or minority discount applies to the stake being sold.

No synergies, no special buyer.

A trade buyer might pay extra because it can cut costs or cross-sell. An EOT cannot. The value should be what the business is worth as it stands, run by its existing team. If the proposed price only works by assuming a trade buyer's premium, expect questions.

Deferred consideration and affordability.

Most EOT sales are funded largely by deferred payments. Deferral does not change the market value of the shares, but trustees must be satisfied the company can pay without starving itself of working capital or investment. A good report shows the payment schedule against realistic forecasts. Our guide to deferred consideration covers the mechanics.

What the 50% relief means for the price.

For disposals on or after 26 November 2025, half of the seller's gain is relieved and half is taxed. The price therefore sets a real tax bill, and HMRC has a direct interest in whether it is supported. The relief claim itself is a matter for your tax adviser. Our role is to make sure the figure underneath it is independent and evidenced.

What trustees should keep on file.

• The independent valuation report, with its valuation date.
• The information the valuer relied on, listed in the report appendix.
• Board and trustee minutes showing how the price was considered.
• The forecasts supporting the deferred payment schedule.

Our EOT valuation checklist lists every document to gather.

Frequently asked.

Sources.

• HMRC, Capital Gains Tax: Employee Ownership Trusts relief reduction
• HMRC, Changes to the tax rules for Employee Ownership Trusts (October 2024)
• HMRC Capital Gains Manual, CG67800 onwards: Employee Ownership Trusts

This guide explains valuation practice and is not tax or legal advice.

Need an independent figure? See our EOT valuation service, fixed fee from £495.