Government urged to end to tax barriers of moving companies into employee ownership

Irish Independent

01-06-2025

IPSA has long argued the current tax structures represent an obstacle for business owners seeking to move their company to employee ownership through Employee Ownership Trusts (EOT). The group has called for Ireland to replicate the EOT model in the UK, where there has been significant uptake through a generous relief on Capital Gains Tax (CGT).
The group recently met with officials at the Department of Finance and is calling for targeted reforms to reduce the 'tax obstacles' for EOTs in Budget 2026. It hopes reforms will incentivise succession planning through broader use of the trusts and, ultimately, protect jobs at companies that could otherwise be dismantled after a sale.
Marie Flynn, chairperson of IPSA, said gaining political engagement on EOTs was a priority for the organisation.
'It is crucial for convincing the Government to follow the advice of the 2024 Indecon Review to reform the taxation of EOTs in Ireland so that business owners and employees can benefit from an economic model that has proven popular and successful in the UK, US, Australia and Canada.'
Flynn said that when owners look to exit their business, sale options typically include trade buyers, private equity firms or the next generation in the family. A third-party sale usually attracts CGT of 33pc.
However, with EOTs, there are question marks over whether selling shares to such a trust would just attract CGT.
Due to what Flynn called 'unhelpful anti-avoidance legislation', the tax bill when someone sells to an EOT in Ireland could hit as high as 55pc.
Flynn added that EOTs are considered 'discretionary trusts' and attract a tax that kicks in when the person who sold their shares to it dies. This means a 6pc tax charge is placed on the trust, with a 1pc levy applied yearly.
IPSA wants the Government to remove these tax obstacles through a mix of Revenue guidance and an exemption from the discretionary trust tax regime for EOTs. IPSA calculates that this would result in no revenue loss from 'levelling the playing field.'
IPSA's plan also includes the Government implementing a recommendation in the 2024 Indecon review to reform the taxation of Irish EOTs in line with their treatment in the UK. Business owners in the UK have relief from CGT on selling a controlling, or 100pc, stake to an EOT.
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Flynn said there was massive potential for EOTs in Ireland. She believed several hundred companies could become employee-owned over the next number of years should the Government support it.
An EOT is a trust that enables a company to become owned by its employees. It can be set up by a company's existing owners as part of their exit or succession planning strategy. Founders starting a new business can also set one up if they wish to be employee-owned.
IPSA argues that EOTs would benefit Ireland as their wider use would help secure workers' jobs and ensure a company remains in its community. It argues that sales to a competitor can often result in businesses being dismantled or relocated, with an accompanying loss of jobs.