The Rise of Employee Ownership Trusts

The Entertainer, one of the UK’s biggest toy shop chains, has announced that it will transfer full ownership of the business to its 1,900 staff through an Employee Ownership Trust (EOT). The move, which follows similar decisions by other well-known companies, highlights the growing appeal of employee ownership as a succession model.

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How an EOT Works

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An EOT is a trust set up for the benefit of a company’s employees. The trust acquires a controlling interest in the company from the selling shareholders, often funded by company profits over time. In The Entertainer’s case, 100% of the shares are being transferred into employee ownership, with the trustees responsible for holding and managing the shares on behalf of the staff.

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Why Choose an EOT?

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There are a number of reasons why more businesses are exploring employee ownership:

• A smooth exit for shareholders – selling to an EOT can be easier and more predictable than finding an external buyer, and offers capital gains tax relief when more than 50% of the company is sold.

• Preserving company culture – ownership passes internally, meaning the business can retain its character, values, and way of working. For The Entertainer, protecting the family feel of the business was a priority.

• Employee incentivisation – employees gain a voice and a stake in the company’s future, with the potential to receive annual tax-free bonuses of up to £3,600. This helps motivate staff, reward loyalty, and attract new talent.

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Key Considerations

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Although the benefits are significant, EOTs come with complex statutory requirements. Trustees must hold a controlling interest in the business, employees must be able to benefit equally, and the purchase price cannot exceed market value. Care is needed to balance competing interests — for example, between paying bonuses to staff and ensuring selling shareholders receive deferred payments. Compliance must also be carefully maintained in the years following the transfer to protect tax relief.

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A Growing Trend

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For The Entertainer, which has grown into one of the UK’s best-known retailers since its founding in 1981, the decision reflects a desire to secure the company’s long-term future while rewarding the employees who helped build its success. With the mix of tax advantages, cultural preservation, and employee engagement, it is a model we are likely to see more of in the years ahead.