The following Share Incentives guidance note provides comprehensive and up to date legal information covering:
It is important when establishing or operating an employee benefit trust (EBT) that the potential for Inheritance Tax (IHT) charges to arise is considered carefully. The following questions should be asked:
Does the EBT meet the requirements of section 86 of the Inheritance Tax Act 1984 (IHTA 1984) (a section 86 trust)?
Does the EBT have sub-trusts (and if so, is it still a section 86 trust)?
Is the company funding the EBT a close company?
How are the beneficiaries intended to receive benefits from the EBT?
As a general rule, property comprised in a discretionary settlement such as an EBT is subject to the IHT regime. Where an IHT charge arises, it is payable by the trustees of the settlement.
However, trusts which are for the benefit of employees which meet the specific requirements of IHTA 1984, s 86 ('Section 86 trusts') qualify for various exemptions from the IHT regime (such as the exit and ten-year charges explained below).
Employee-ownership trusts (EOTs), which are a special type of employee trust, similarly benefit from these IHT exemptions provided certain conditions are met (see below). For further general information on EOTs, see Practice Note: Employee-ownership trusts.
Unless a discretionary settlement qualifies
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