Britain's biggest toy shop chain handed over to staff
Gary Grant, founder of The Entertainer, is preparing to transfer his family's 100pc ownership of the firm to an employee ownership trust (EOT), with the transfer to be completed next month.
The move exempts his family from potential death duties ahead of Rachel Reeves's inheritance tax (IHT) raid.
The retailer said the step would 'ensure the group remains independent with its employees as beneficiaries, while preserving both the family's legacy and the family feel of the business'.
It comes amid a shake-up of IHT rules by the Government, which will cap tax relief on family businesses handed down to descendants at £1m from April next year, resulting in higher bills for those inheriting businesses.
Under the previous system, company owners could leave assets to their families without paying death duties.
The reforms, announced by Rachel Reeves, the Chancellor, in her maiden Budget last October, were designed to clamp down on tax avoidance and raise money for public services. However, they have outraged the owners of many family businesses, who argue that the changes will result in soaring IHT bills that could force their descendants to sell up.
While the change at The Entertainer will allow the Grant family to avoid higher death duties, it is understood that exempting the company from IHT was not the sole motivating factor in moving the toy chain into employee ownership.
Mr Grant said the decision had not been 'taken lightly'.
He added: 'We couldn't be more proud that this still remains at the heart of the business today, thanks to the daily enthusiasm of our staff – many of whom have worked for us for many years. Because of this, ensuring our employees have a place in the Group's future is hugely important to us.'
Under the EOT model, a controlling stake in The Entertainer will transfer to a trust which is indirectly owned by the employees, removing the need for staff to actually purchase shares themselves. The Grant family will receive payments for the business out of its future profits, although the company did not disclose a valuation. Any proceeds received by the Grant family will be tax-free.
Advocates of employee ownership say it rewards staff better, increases loyalty and productivity. Examples of prominent businesses that use this model include the John Lewis Partnership and retail chain Richer Sounds.
James de la Vingne, the chief executive of the Employee Ownership Association, said there was 'a growing trend for retailers making the move to employee ownership alongside calls to help save the high street'.
Founded in Buckinghamshire in 1981, The Entertainer today runs more than 160 stores across the country and over 1,000 concessions in stores such as Tesco, Matalan and Marks & Spencer. As well as its eponymous stores, it owns the Early Learning Centre and Addo brands.
The Grant family were paid a £15.62m divided during 2023, according to the latest available accounts for The Entertainer's parent company Teal Group Holdings, despite a fall in both sales and profits.
Last November, Andrew Murphy, The Entertainer's chief executive, said the company had been forced to cancel two new store openings because of higher National Insurance contributions levied on employers in Ms Reeves's Budget.
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