Trustees in a boardroom governance meeting

EOT trustees and governance

EOT Trustees

Trustees are not there for window dressing. Trustee composition now has qualifying-rule consequences, and the structure needs enough independence to be credible.

For disposals on or after 30 October 2024, HMRC's framework sets out specific requirements for trustee independence, control, and UK residence. Getting trustee governance right is a condition of the relief, not an optional extra.

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The trustee independence requirement

For disposals on or after 30 October 2024, the EOT must meet the trustee independence requirement at the time of disposal and for the remainder of that tax year. This means two things must be true:

The 50% rule

Fewer than 50% of the trustees can be excluded participators. If half or more of the trustees are former owners or persons connected with them, the independence requirement is not met.

The control restriction

Excluded participators must not control the settlement. Even where they are a minority of trustees, they must not hold powers that give them effective control over the trust.

Trustee composition is a qualifying condition, not a suggestion. Getting it wrong puts the relief at risk.

Professional team discussing trustee composition and appointments

Independent trustee reviewing trust deed documentation

What counts as control?

HMRC spells out the control-style powers that matter when assessing whether excluded participators control the settlement. These include:

Powers over trust property

Varying or terminating the settlement

Changing beneficiaries

Appointing or removing trustees

Directing the exercise of those powers

If the former owner or connected persons hold any of these powers, directly or indirectly, the independence requirement may not be met, even if they are a numerical minority of trustees.

UK resident trustees

For disposals on or after 30 October 2024, the trustees of the settlement must be UK resident at the time of disposal and for the remainder of that tax year. This is assessed on the basis of the trustees as a single body of persons.

This requirement ensures that the trust remains within the jurisdiction of UK tax law and regulatory oversight. Trustee appointments need to be structured with this in mind from the outset, not addressed as an afterthought.

UK residence is a qualifying condition. If the trustees are not UK resident as a body at disposal, the relief may not be available.

Governance that works in practice

Meeting the qualifying rules is necessary, but it is not the whole picture. The trustee body also needs to function effectively as a governance structure for the employee-owned business.

That means trustees who understand their responsibilities, have access to appropriate advice, and are capable of making informed decisions about the trust's interests, including valuation, funding, and the ongoing relationship with the company.

Governance should work in practice, not just in theory. A trustee structure that satisfies the rules on paper but lacks the capacity or independence to operate properly creates risk for the business, the employees, and the relief itself.

EOT Advisers EOT Feasibility Report What is an EOT?

Professionals reviewing governance framework and organisational structure

Common trustee mistakes to avoid

Treating trustee appointments as a formality rather than a qualifying requirement

Allowing excluded participators to form 50% or more of the trustee body

Giving the former owner effective control through reserved powers or veto rights

Failing to consider UK residence at the time of disposal and for the rest of that tax year

Appointing trustees without regard to independence, experience, or governance capability

Assuming that governance arrangements established at completion do not need to be maintained

Related guidance

EOT for Trustees EOT Advisers EOT Valuation EOT Funding EOT Feasibility Report EOT Tax Changes Explained What is an EOT?

Trustee structure should be considered alongside valuation, funding, tax, and the broader question of whether an EOT is the right route for the business.

Advisory team welcoming a client for a trustee governance consultation

Talk to the Employee Ownership Experts

If you need guidance on trustee composition, independence requirements, or governance planning for an EOT, we welcome confidential enquiries from owners and advisers.

Related EOT resources

Continue your research with our core guides on Employee Ownership Trusts.