The exiting owner will often want to maximise the amount that she can extract from the business. This does though need to be balanced with affordability for the EOT: balance meaning (1) the extent of time that payments will be made to the outgoing shareholders – when will the last payment be made? (2) the affordability and timing of the periodic payments – will they clash with the timing of anticipated CAPEX, or periodic payments such as for Corporation Tax? (3) Interest, if any on the amounts deferred, (4) the affordability of the amount payable on completion to the outgoing shareholders.
Whilst this chapter on Financial Aspects is included at the end of this guide, we believe it is the most important stage of considering an EOT. Often when accepting engagement we set two phases: Affordability, and then Implementation.
If the numbers do not work for the outgoing shareholders AND the EOT AND the management team who need to deliver for the benefit of all AND HMRC, THEN an EOT is not the right answer.
The process should therefore be for advisors to work with key members in the organisation to produce a model including integrated Profit and Loss Account, Balance Sheet and Cash Flow.
We recommend that this is for the expected payout period plus 18 months, in case problems arise, and should be presented quarter by quarter.
The model should include assumptions so that the effects of remodelling can be seen, and might include:
“What happens if we charge interest (at varying rates) on the deferred amounts?”
“What happens if we pay out the shareholders over 6 years not 5?”
“What happens if we increase the amount payable at the start of £X’000’s? And if we take on debt to do that at Y% of interest what happened then?”
“What happens if the shareholders are paid half-yearly rather than annually?”
“Is the tax payable by the shareholders and the company affordable?”
How CBSL Accountants Support You
At CBSL, we understand that succession is both a technical and an emotional journey. We support business owners through every stage of the EOT process, from initial exploration to long‑term governance.
Our services include succession planning, independent valuation, financial modelling, HMRC clearance, legal coordination, trustee training, employee communication support, and ongoing governance guidance.
We approach every engagement with warmth, clarity, and a deep respect for the legacy you have built. Our goal is to help you navigate this transition with confidence, clarity, and a sense of partnership.
