Readers’ forum: Employee ownership trusts

I see that many advisers are pushing businesses towards implementing employee ownership trusts (EOTs). I have no problem with their use for their intended purpose of spreading ownership among a large group of employees but I am seeing EOTs being promoted as a profit extraction scheme for business owners.

For example I heard from a client today that he had been told by an adviser that they would agree a valuation with HMRC for the shares of a tech business in the order of £5m. This would enable them to extract cash tax free over a number of years and obviate the need to pay dividends.

The advisers were certainly not emphasising the fact that the whole point of the scheme was to spread equity and I do not think that the client understood that he was being advised to relinquish control and give up a...