Employee benefit trust (EBT) meaning

FORTHCOMING CHANGE: On 11 March 2024, HM Treasury opened a consultation examining the effectiveness of the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017 (SI 2017/692), which impose duties on a range of businesses to identify and prevent money laundering and terrorist financing. The government published its response on 17 July 2025, followed on 2 September 2025 by a draft statutory instrument and an accompanying policy note. The draft SI proposes a de minimis exemption from the requirement to register with the Trust Registration Service where, among other conditions, a trust with no UK tax liability also satisfies all of the following: it holds no interest in UK land; it holds no assets of significant value exceeding £2,000; it has not, since creation, held property with a cumulative value above £10,000; and its income does not exceed £5,000 per annum. This exemption would not be retrospective and would apply solely to new trusts set...

Christopher Purkiss (as liquidator of Ethos Solutions Limited) v Tim Kennedy and others [2025] EWCA Civ 268 Ethos Solutions Limited (the Company) ran a disguised remuneration arrangement under which sums were channelled to an employee benefit trust (EBT) without withholding income tax or NICs. The EBT’s trustee allocated funds into sub-trusts for the respondents and, when asked, advanced the amounts to them as discretionary loans. On 4 December 2012, HMRC issued determinations, holding the Company liable for income tax and NICs of c.£2m arising from payments made to the EBT in the 2008‑09 and 2009‑10 tax years. On 18 December 2012, the Company entered creditors’ voluntary liquidation, making no remittances to HMRC and taking no steps to appeal. On 9 January 2013, HMRC lodged a proof of debt totalling c.£2m with respect to those same EBT payments, as claimed therein...

In this issue: Employee benefit trusts Budgets, Autumn Statements and Finance Bills Remuneration issues for financial services firms Useful Information Weekly highlights from other practice areas Employee benefit trusts JTC Employer Solutions Trustee Ltd (as trustee of the Henderson Family Benefit Trust) Garnett [2024] EWHC 3128 (Ch) This claim sought rescission of a number of deeds of appointment made under two employee benefit trusts (EBTs). The appointments established sub-trusts for named employees and their families under each trust and, in HMRC’s assessment, caused the appointed assets to fall outside the exemption in section 86 of the Inheritance Tax Act 1984 (Section 86), thereby creating potential inheritance tax exposures. The claimants argued that the appointments were executed on the mistaken assumption that the assets would remain within the Section 86 exemption, and that this error was sufficiently serious to justify setting the deeds aside. HMRC, in correspondence, raised objections that included the prospect of refusing relief on public policy...

In this issue: Employment taxes Companies and corporation tax Taxes management and administration VAT Energy and environment International Devolved taxes Current issues Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Employment taxes FTT decides that amounts paid into contractor loan scheme were earnings which HMRC had validly assessed to income tax (O’Brien v HMRC) As highlighted last week, in O’Brien v HMRC [2026] UKFTT 127 (TC), the First-tier Tax Tribunal (FTT) concluded that sums channelled into a contractor loan arrangement constituted earnings, and HMRC’s income tax assessments were valid. Relying on the redirection principle, the FTT found that the tax charge arose when the taxpayer diverted his remuneration to an employee benefit trust (EBT) designed to sidestep income tax by advancing loans from those funds. In addition, the FTT held that HMRC met the statutory tests for issuing a discovery assessment—specifically, the...

When a company launches a new plan, it will typically decide to settle awards by either: issuing fresh shares, or using existing shares bought on the market, commonly via an employee benefit trust (EBT) that purchases shares in the market or from individual shareholders to satisfy awards granted under the company’s share plans This practice note examines share hedging in the context of an employee share plan and outlines the key points to address to manage potential costs and the financial risks associated with share hedging. In essence, a company must balance: the need to acquire enough (but ideally not excess) shares ahead of option exercises/acquisition of shares by employees, and the need to contain costs by buying when the share price is low Why do companies use EBTs to share hedge? Companies operating share plans (for example through the grant of options or conditional share awards and/or direct share acquisitions) often need to...

What are JSOP awards? Jointly owned shares are exactly what the term suggests: shares held together by an employee or director and another party — either a company investor or, more typically, the trustees of an employee benefit trust (EBT). Joint share ownership arose as a substitute for other share incentive arrangements, for example share options, restricted shares or performance share plans (frequently delivered via nil cost options). Under a joint share ownership plan (JSOP), the value received equals the uplift in the share price after grant (usually plus a ‘carrying cost’). Consequently, a JSOP operates like a market value share option, albeit with a distinct tax outcome. In essence, the plan focuses value on growth arising after grant, rather than existing value at the time of award for participants today. Commercial rationale The JSOP model offers a number of commercial strengths when set against alternative award structures. These include: Compared with share options or performance share plans where share acquisition is deferred: ...

What is an employee ownership trust? An employee ownership trust (EOT) is a specific kind of employee benefit trust (EBT) that must meet statutory criteria. The concept was introduced by the Finance Act 2014 (FA 2014), together with tax advantages for companies owned by an EOT and for individuals who dispose of shares to an EOT. If the statutory criteria are not met in relation to the EOT, these reliefs will not be available. The reliefs were enacted by FA 2014, Sch 37, following a Budget 2013 announcement and a subsequent consultation. For guidance on pitfalls and common errors when creating or running an EOT, see Practice Note: Pitfalls of setting up and operating an employee-ownership trust. For general information on EBTs, see Practice Note: What is an employee benefit trust? What tax reliefs can an EOT provide? Three tax reliefs were legislated, in line with a policy of encouraging the development of employee-owned companies as an alternative to a trade sale or other loss of independence...

[ insert full name of Trustee ] serving as trustee for the [ insert full name of the employee benefit trust ] [ insert full address of trustees ] [ insert date of letter ] Dear Trustee(s) [ insert name of the employee benefit trust ] ( EBT ) We write to you in your role as trustee of the EBT ( Trustee )...

This Deed is made on [ insert date ] BY [ insert full name of Trustee ], incorporated and registered in [ insert country in which the trustee is incorporated ] under company number [ insert company registered number ], whose registered office is at [ insert address of registered office ], acting in its capacity as sole trustee of the [ insert name of the EBT ] Employee Benefit Trust (the Trustee). Background Under a trust deed dated [ insert date of EBT trust deed ] (the Trust Deed), [ insert full name of company ], incorporated and registered in England and Wales with company number [ insert registered number ], whose registered office is at [ insert registered office address ] (the Company), created the [ insert name of EBT ] Employee Benefit Trust (the EBT). The Company is discussing with [ insert name of potential buyer ] (the Buyer) the proposed disposal of all of the issued share capital (the Shares) of...

This DEED is entered into on [ insert date on which this deed is executed by all parties ] Parties [ Insert name of Company ] whose registered office is at [ insert address of registered office ] and whose registered number is [ insert registered number of Company ] (the Company); and [ Insert name of Trustee ] whose registered address is at [ insert address ] [ and whose registered company number is [ insert registered company number of Trustee ] ] (the Original Trustee). Background The Company intends to establish a trust to be known as the [ insert name of EBT ] with the objective of encouraging, motivating and retaining Employees within the Group Companies by providing benefits to such Employees and their dependants. The Company has transferred to the Original Trustee the sum of £[ insert initial settlement amount ] as the initial Trust Fund. It is anticipated that the Trustees will...