EOT valuations
UK Employee Ownership Trust Valuations
A defensible market-value report built for the post-26 November 2025 tax regime, the trustees' fiduciary duty, and the lender's appetite for vendor finance.
Specialist practice
Dedicated EOT valuation support
For dedicated Employee Ownership Trust support, visit our specialist EOT practice: EOT specialists. The specialist team covers trustee-defensible EOT pricing, the post-26 November 2025 50% relief regime, vendor loan sizing and HMRC compliance evidence.
Overview
An EOT valuation is the load-bearing document of the whole transaction. It sets the price the trustees can defensibly pay, anchors the seller's chargeable gain under the new 50% relief regime and underpins the vendor loan that most UK EOT deals rely on. Since 26 November 2025 the EOT route is no longer a fully tax-free exit. 50% of the qualifying gain is now chargeable at the seller's normal CGT rates, while the remaining 50% can still attract relief if the statutory conditions are met and not breached during the disqualifying period.
A trustee-defensible EOT valuation triangulates three methods: adjusted EBITDA multiple, discounted cash flow and net asset review. It is presented alongside a normalisation schedule, a vendor loan affordability model and a qualifying-test review. The report is the evidential record HMRC, the trustees, the seller's tax adviser and the lender each rely on, and it is examined in that order if an enquiry ever opens.
The typical eighteen-month sequence runs: independent indicative valuation, trust deed and trustee selection, value-driver work on owner dependency, refreshed valuation at completion, tax and BADR modelling, trustee sign-off with lender documentation, and a compliance calendar covering the disqualifying period. Skipping any of these steps is where most breaches later originate.
For deep detail on trustee methodology, disqualifying-event risk, vendor-loan structuring and worked case studies, the EOT specialists practice covers extended guidance, trustee training and worked case studies.
Frequently asked questions
Frequently asked questions
What is an EOT valuation and why is it needed?
An Employee Ownership Trust valuation is an independent market-value assessment of the company commissioned before shares transfer to the trust. HMRC will only treat the transaction as a qualifying EOT disposal if the price paid by the trustees reflects defensible open market value. Without an arm's-length valuation the relief is at risk, the trustees are exposed to a breach of fiduciary duty, and any subsequent enquiry by HMRC has no evidential anchor. The valuation is, in short, the document on which the entire structure stands.
Does an EOT still deliver 0% Capital Gains Tax in 2026?
No. For qualifying disposals to an Employee Ownership Trust made on or after 26 November 2025 the headline 100% CGT relief was halved. Where the qualifying conditions are met and the relief is claimed, **50% of the gain is chargeable** at the seller's normal CGT rates (24% for higher-rate taxpayers in most cases). The remaining 50% can still qualify for EOT relief subject to the statutory conditions and the disqualifying-period rules. The route remains tax-efficient relative to a straight trade sale for many owners, but it is no longer a fully CGT-free exit and the modelling must reflect this.
How long does an EOT valuation take to produce?
A standard EOT valuation report for an SME with clean management accounts takes **three to four weeks** from instruction to delivery. Complex groups, businesses with multiple trading entities, or those with material non-trading assets (surplus property, investment portfolios) typically need five to six weeks. We recommend allowing eight to twelve weeks end-to-end so that the trustees, the seller's tax adviser, and the lender (if vendor finance is involved) all have time to review and respond.
What financial information do you need to start?
Three years of statutory accounts, the most recent management accounts and trial balance, a twelve-month forecast, and a short note on owner remuneration, intercompany positions, and any non-trading items on the balance sheet. We will also ask for a list of the top ten customers by revenue and the contract status for each, plus the management organisation chart. If the data is not complete on day one we work with whatever is available and flag the gaps in the report, rather than delaying delivery.
Who reads the valuation, and what do they look for?
Four audiences. The trustees rely on it to evidence that they have not overpaid (their fiduciary duty). The seller's tax adviser uses it to model the post-26 November 2025 chargeable position and to support the BADR claim on the chargeable half. The funding lender uses it to size the vendor loan or bank facility. HMRC, if they enquire, will use it as the evidential record. Each audience has a different question, and a competent EOT valuation answers all four.
Can the owners stay on after the EOT completes?
Yes. There is no requirement to leave. Most founders we work with stay in an executive role for **eighteen to thirty-six months** after completion, drawing a market salary and continuing to lead strategy while the successor management team takes operational control. This is preferred by trustees and lenders because it de-risks the transition, and it gives the founder a structured glidepath out of the business rather than a cliff edge.
What happens if the EOT conditions are breached after completion?
The post-26 November 2025 rules tightened the disqualifying-event regime materially. A breach (for example, the trust ceasing to hold a controlling interest, the trustees failing the independence test, or a prohibited payment being made) within the disqualifying period can trigger a clawback of the relief and a substantial tax bill. Robust trustee governance, an independent corporate trustee structure, and an annual compliance review are now non-negotiable rather than nice-to-have. The valuation file forms part of that compliance record.
Speak with the EOT valuation team
A 20-minute confidential call with our team to scope your EOT timeline, the trustee structure, and the valuation evidence you need. No obligation.