Employee benefit trusts—on-shore and offshore trusts and tax implications
Produced in partnership with Jeremy Glover (Share Schemes)

The following Share Incentives practice note produced in partnership with Jeremy Glover (Share Schemes) provides comprehensive and up to date legal information covering:

  • Employee benefit trusts—on-shore and offshore trusts and tax implications
  • Reasons for going offshore
  • Why choose an on-shore trustee?
  • Notification of the establishment of on-shore and offshore EBTs
  • Tax position of trustees of an EBT
  • Income
  • Change in residence status of trustees
  • Employee ownership trusts
  • Share Incentive Plan EBTs
  • Tax considerations for the company

Employee benefit trusts—on-shore and offshore trusts and tax implications

Trustees are generally treated as UK resident if all the trustees are resident in the UK, or:

  1. at least one trustee is resident in the UK

  2. there is a mixture of resident and non-resident trustees acting at the same time, and

  3. the settlor of the trust was resident, or domiciled in the UK at broadly the time when the settlor made the settlement

The position is altered for a trustee who is not resident in the UK if the trustee acts as trustee in the course of a business that the trustee carries on through a ‘branch or agency or permanent establishment’ in the UK. In these circumstances the trustee will be treated as if they were resident in the UK at that time.

HMRC takes the view that the ‘branch’ or ‘agency’ tests apply to non-corporate trustees and the ‘permanent establishment’ test to corporate trustees. Non-UK resident companies that are trustees therefore need only be concerned about being treated as UK resident if they carry on a business through a permanent establishment in the UK. When considering whether a trustee is resident, the following three questions are relevant:

  1. Is the trustee carrying on a business in the UK?

  2. If the trustee is carrying on a business in the UK is it carrying on that business through a

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