The reduction of tax relief on disposals to employee-ownership trusts (EOTs), which had been becoming increasingly popular in the industry, is set to impact the appeal of that mechanism, coach and bus industry figures have said.
In her Budget speech on 26 November, Chancellor Rachel Reeves announced that EOTs would qualify for only 50% capital gains tax relief rather than full exemption. Effectively, shareholders who use an EOT, for example before a move into retirement, will be liable for 12% CGT on the value of the gain.
Kevin Wilde, Senior Transport Consultant at 21point5, which advises coach and bus operators on exit strategies, says: “The reduction in the effective CGT relief from 100% to 50% for EOTs, although understandable from a revenue-raising perspective, will be a block on transferring a potentially stable business from the owners to the staff and maintaining the business on a stable footing.”
The former MD of Mitcham Belle Coaches adds: “Without doubt, EOTs will be affected after implementation with owners who have taken many years to build their businesses looking for the most effective means of exiting whilst maintaining stability with the organisation.”
Bill Hiron, who owned Stephensons of Essex and NIBS Buses parent Eastern Transport Holdings before its sale to an EOT in 2024, says: “Some people will still feel it’s a worthwhile venture, but in other cases, it will be the deciding factor for people to think the sums don’t quite stack up so I won’t do it.”
CGT on EOTs will be payable in the financial year following disposal, thus before the previous owner has received most of the gain. Mr Hiron says: “If I’d had to pay the tax [CGT] up front, I wouldn’t have been able to do it.”
On 21 November, Berrys Coaches of Taunton announced it had become the latest to move to EOT “to ensure responsible succession planning”.
