The Employee Ownership Association (EOA) has published its submission to the Department for Business and Trade’s call for evidence on business support for mutuals.
Part of the Labour government’s pledge to double the size of the UK co-op and mutual economy, the call, says EOA, is “a once in a parliament opportunity to make the collective voice of employee ownership heard.”
In the submission, it said: “Employee ownership delivers productivity, resilience, and workforce benefits, but growth is being held back by low awareness and rising complexity in the employee ownership trust (EOT) system.
“Our final submission calls on government to update HMRC guidance, simplify EOT rules, and clarify Capital Gains Tax (CGT) instalments and disqualifying‑event risks. Mainstream business support and financial institutions also need better EO understanding and signposting.
“Targeted feasibility funding, lending or guarantees – especially in capital‑intensive sectors – would reduce friction, while small legislative tweaks would enable EOTs to integrate with share plans and build workforce wealth.”
It also called for greater clarity around the CGT changes in last year’s autumn budget.
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“Formal guidance from HMRC would help to reduce uncertainty for any business owners considering a transition to employee ownership, as well as raising a broader awareness of EO as a succession tool,” says the EOA.
“The changes to CGT relief on EOTs have introduced new tax liabilities, clawback risks, and ambiguity – particularly around instalment relief – without updated HMRC guidance. The result could be a slowdown of EO transitions.”
The EOA also highlights a lack of awareness of the model – a persistent bugbear for the co-op and mutuals sectors, and noted the omission of employee ownership, co-operatives, and building societies from a definition of impact economy activity in a recent Impact Economy report.
“Many business leaders, employees, advisers, and financial institutions still lack understanding of EO,” it warns. “Success stories exist, but they’re not widely profiled through mainstream business support channels. These channels need to integrate a knowledge and awareness of EO, signposting to trusted information sources, basic ‘EO explorer’ guidance, and clear referral pathways.”
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There are also structural challenges around finance, the apex says. “Lenders’ unfamiliarity with EOT structures creates friction in KYC processes, ownership checks, and lending norms such as personal guarantees. Asset‑heavy sectors face additional difficulties when competing with third‑party buyers offering higher valuations.”
The apex said it based its response on a review of the most up-to-date evidence – including the EO Knowledge Programme, data from the EOA and White Rose Employee Ownership Centre’s EO Business Register, and analysis around its EO Growth Strategy.
Meanwhile, a “collaborative consultation process with members” included seeking the insights and views of the EOA’s specialist advisors and advisor members and distributing an early draft with members who were invited to share their feedback.
“It also represents the culmination of a variety of EOA efforts, most recently our involvement on the Mutual and Co-operative Sector Business Council (MCSBC), which acts as a conduit between the mutual and co-operative sector and government”.
