Invest NI’s business advice service reported on Thursday that Employee Ownership Ireland has added advisers to its Feasibility Study Panel, and that Northern Ireland owners considering employee ownership as a succession route can get a feasibility study fully funded by the Department for the Economy. It also carries a number worth pausing on: research commissioned by Employee Ownership Ireland found that nearly 60% of Northern Ireland business owners in a snapshot poll would like to find out more about employee ownership.
Here is the part the announcement does not say, and it is the part that changes the arithmetic. The tax relief that made this route attractive was cut in half nine months ago. Until 26 November 2025, selling your shares to an Employee Ownership Trust produced no chargeable gain at all. It now produces one on half the gain, and you cannot use Business Asset Disposal Relief on that half. That does not make the funded study less worth having. It makes it considerably more worth having, because there is now a real sum to do rather than a foregone conclusion, and a three-day study you do not pay for is a sensible place to do it.
What actually changed, and when
This is settled law, not a proposal. HMRC’s policy paper Capital Gains Tax — Employee Ownership Trusts relief reduction, published on 26 November 2025, announced the reduction from 100% to 50% for all disposals made on or after that date. It was enacted as section 35 of the Finance Act 2026, which received Royal Assent on 18 March 2026.
The enacted wording does three things. Only 50% of the gain is a chargeable gain. The disposal is not to be regarded as a qualifying business disposal for Business Asset Disposal Relief, and the shares are treated as excluded shares for Investors’ Relief. And the trustees’ acquisition cost is reduced by the untaxed half, so that half is held over rather than written off — it comes into charge on any later disposal by the trustees.
HMRC’s own costing is the clearest guide to how big a change this is. The policy paper puts the Exchequer yield at £185m in 2026 to 2027, rising to £985m by 2030 to 2031, certified by the Office for Budget Responsibility. That is not a tidying-up measure.
What it costs on a £2m Northern Ireland sale
Take an engineering company in Co. Armagh with 25 staff. One owner, who subscribed £100 for the shares two decades ago, sells the whole company for £2,000,000, giving a gain of £1,999,900. They are a higher rate taxpayer and have not used their Business Asset Disposal Relief lifetime allowance. This is an illustration built from published rates, not a client file.
The rates are the ones on gov.uk for 2026 to 2027: Capital Gains Tax at 18% within the basic rate band and 24% above it, an annual exempt amount of £3,000, and Business Asset Disposal Relief at 18% on the first £1m of lifetime gains.
| Route | Gain charged now | Rate | Tax due |
|---|---|---|---|
| EOT sale before 26 Nov 2025 | £0 | — | £0 |
| EOT sale today | £996,950 | 24% | £239,268 |
| Trade sale — first £1m | £1,000,000 | 18% | £180,000 |
| Trade sale — balance | £996,900 | 24% | £239,256 |
| Trade sale — total | £1,996,900 | — | £419,256 |
Two conclusions fall out of that, and they pull in opposite directions. The employee ownership route still wins on tax, by £179,988. And it costs £239,268 more than it did on 25 November 2025, on a deal where the owner is usually being paid in instalments out of the company’s future profits rather than in cash on day one. The tax is due on the normal Capital Gains Tax timetable regardless of when the deferred consideration actually arrives. That is a funding question, and it is the single most important thing a feasibility study should model.
Our capital gains calculator will run your own numbers on the chargeable half. For the trade sale comparison, we set out what the Business Asset Disposal Relief change did to exit values in selling your business now costs 18%, not 10%.
The half you did not pay is still sitting in the trust
It is easy to read “50% relief” as a discount. It is not. The untaxed half is deducted from what the trustees are treated as having paid for the shares, which means the trust starts life with a built-in gain equal to the amount you did not pay tax on. If the trustees ever sell — a later trade sale, a restructure, a rescue — that gain crystallises in the trust.
Practically, that belongs in the trust deed conversation and in whatever the employees are told at the outset. A workforce that believes it owns a debt-free company, and a set of trustees holding shares with a £999,950 embedded gain, are not looking at the same business. Getting that written down in plain terms at the start is legal and governance work more than it is tax work, but it starts from a tax number.
Four tax years of exposure, not one
The clawback rules changed before the rate did, and they are still not widely understood. HMRC’s Capital Gains Manual at CG67860 lists the disqualifying events that withdraw the relief if they occur in the four tax years following the year of disposal. For disposals before 30 October 2024 the window was the following tax year only.
The events are: the settlement ceasing to meet the trustee residence requirement, the trustee independence requirement, the controlling interest requirement or the all-employee benefit requirement; the company ceasing to meet the trading requirement; the participator fraction exceeding two-fifths; or the trustees acting in a way the trust does not permit. The trustee residence and trustee independence requirements are themselves new, applying to transactions from 30 October 2024.
So a sale completing this tax year keeps the seller’s tax position live until 5 April 2031. That is four and a half years during which a change of trustee residence, or the company drifting out of trading, can undo the relief on a deal that has already been signed and largely paid for. It is also, in most EOT deals, the same period over which the seller is still being paid. Anyone selling this way needs the deferred consideration schedule and the disqualifying-event risk looked at on the same page, which is exactly the sort of thing management accounts and a proper business plan should be carrying through the transition years.
The £3,600 bonus, and the National Insurance it does not cover
The other half of the EOT regime is the tax-free bonus, and it survives the change untouched. HMRC’s Employment Income Manual at EIM03050 confirms that qualifying bonus payments of up to £3,600 per employee can be made free of income tax, and states plainly that the exemption does not extend to National Insurance.
Put numbers on it for the same 25-employee company, paying every employee the full £3,600. Using the 2026 to 2027 National Insurance rates — 8% employee on category A earnings in the main band, 15% employer:
| 25 employees at £3,600 each | Qualifying bonus | Ordinary bonus |
|---|---|---|
| Gross paid | £90,000 | £90,000 |
| Income tax deducted (20%) | £0 | £18,000 |
| Employee National Insurance (8%) | £7,200 | £7,200 |
| Employer National Insurance (15%) | £13,500 | £13,500 |
| In each employee’s pocket | £3,312 | £2,592 |
Each employee is £720 better off and the company’s cost is identical at £103,500 either way. That is a genuinely good deal, and it is also the thing owners most often assume is completely free of deductions. It is not: the £7,200 of employee National Insurance and £13,500 of employer National Insurance still have to be paid and processed like any other bonus run, which is a payroll job with real cash attached to it.
What the funded study actually gives you
Employee Ownership Ireland sets out three days of support funded by the Department for the Economy, with an adviser it chooses. One day is desktop research plus a session reviewing your exit plans and how an EOT might work in your company. Two days is the feasibility study itself, if employee ownership looks viable — covering ownership structures, governance, future management requirements, funding for the exit, the transition process, and how the 50% relief applies. The study is yours to keep and share, and there is no obligation to use the adviser or pay anything if you go ahead with an EOT.
The essential criteria are specific: a limited company based in Northern Ireland, three years of trading accounts showing sustainable profitability, a leadership succession plan in place or under development, and a team of employees committed to the company’s continuity. It is aimed at owners seriously considering succession in the next 18 to 24 months.
The profitability criterion is the one to check honestly before applying, because it does double duty. It is a gate on the application, and it is also what an EOT exit is funded out of. A company that cannot show three years of sustainable profit generally cannot pay a departing owner from future trading either.
Two things to do this week
Work out the cash, not just the tax. Take your own likely sale value, halve the gain, apply 24%, and put that figure against the year you would actually receive money under a deferred payment schedule. If the tax lands in year one and the consideration arrives over five, that gap is the deal. It is worth having on paper before you speak to anyone about structure.
Apply, or rule it out properly. The application form on the Feasibility Study Support page asks for ownership percentages, existing shareholder agreements, who runs the business day to day, employee and family-member numbers, and whether you have identified internal successors. Those are the same questions any exit route asks. If you cannot answer them, that is the finding, and it is better found now than in a data room. Our tax planning and advisory work starts in the same place.
What is still open
Three things are genuinely unresolved. Employee Ownership Ireland does not publish an application deadline or a cap on the number of funded studies, and the panel has just been expanded, so how long the funding runs is not stated. The 50% figure is set in primary legislation and could be changed again at a future Budget — it went from 100% to 50% in a single announcement, without consultation on the rate itself. And the interaction that will matter most to sellers already mid-transaction is the treatment of the held-over half if the trustees later sell: the mechanism is clear in the legislation, but there is no worked HMRC guidance on it yet in the Capital Gains Manual pages covering the new rules.
If you are weighing an exit in the next two years from a Northern Ireland company, the funded study answers the structural question and our side answers what it costs you and when. That is the work our Northern Ireland team does from the office in Ballymena.