20th May 2025
Succession is one of the most pressing and personal decisions a care business owner will make. For many founders, particularly those who have built a service rooted in compassion, community and quality of care, handing over the reins is far more than a financial transaction. It’s also about legacy.
Increasingly, owners in the care sector are choosing to exit through an Employee Ownership Trust (EOT); a structure that avoids the disruption that can often accompany third party sales, while simultaneously safeguarding their values, rewarding their team and securing long-term continuity.
At Leonard Curtis Legal, we’ve supported a growing number of businesses through the transition to employee ownership. In our experience, it’s not just a legal process, it’s a cultural shift that is transforming how businesses plan for the future.
What is an Employee Ownership Trust?
An EOT is a government-backed ownership model that allows a business owner to sell a controlling interest (more than 50%) of their company to a trust set up for the benefit of all employees. If certain conditions are met, the sale is then exempt from Capital Gains Tax (CGT), which is an obvious benefit for those planning retirement or succession.
While the trust doesn’t run the business, it does own it on behalf of the workforce. Decisions continue to be made by a management team, but under a new structure where the staff are the ultimate beneficiaries. In an industry where staff retention, engagement and continuity of care are vital, EOTs offer a compelling alternative to trade sales or private equity investment.
Why the Model Fits the Care Sector
The values behind employee ownership align closely with the realities of social care. Businesses succeed here because of their people – the carers who turn up day after day to deliver life-changing support. Yet many of these same staff face limited recognition or reward. EOTs done well can help to rebalance that.
Businesses adopting the EOT model often benefit from improved staff retention and morale, a stronger sense of shared purpose and an increased perception of trust and credibility both internally and externally.
EOT-owned companies can also pay staff annual tax-free bonuses of up to £3,600, providing a meaningful benefit in a sector struggling to compete on wages alone.
Legal and Practical Considerations
It’s important to remember that this is a legal transaction and one that must be carefully structured. To qualify for CGT relief, several conditions must be met. The EOT must acquire more than 50% of shares and voting rights, and the company must be a trading business and not an investment vehicle. It must also benefit all employees on equal terms and the former owners must not retain control.
Once established, the trust is governed by a board of trustees usually including independent members and employee representatives. It’s vital that the governance structure reflects both the legal requirements and operational needs of a care provider.
However, in the care industry it’s not only about meeting technical criteria, we must also think about designing governance models that work for regulated services. That means considering CQC implications, continuity of leadership and long-term financial planning.
Funding the Transition
A common concern is whether a care business can afford to buy itself. In most cases, the purchase is funded through future profits of the company with the outgoing owner receiving deferred payments over time. Some providers also access third-party lending to accelerate the process.
Robust cash flow forecasting is key. Margins in the sector are often tight, so careful modelling is essential to ensure the business remains stable while making repayments. We work alongside accountants and lenders to manage this risk.
A Future-Proof Model for Values-Led Care
What sets EOTs apart is the ability to exit and secure a fair financial return while keeping the culture and purpose of the business intact. In a sector increasingly shaped by scale and commercial pressure, that’s a powerful proposition.
For owners who have built care services with love and long hours and who want to leave something meaningful behind, employee ownership is more than a tax-efficient exit. It’s a legacy model.