Employee trusts ― implications of disguised remuneration and where are we now?

Employee trusts ― implications of disguised remuneration and where are we now?

Employee benefit trusts (EBTs) are commonly used to support employees’ share schemes and to provide other benefits to employees in the form of pensions and bonuses.

Their use has been significantly affected by the introduction of the disguised remuneration rules. For further information, please see the Disguised remuneration ― overview guidance note. Although the statutory exclusions from those rules cover many of the share scheme-related activities of EBTs, some of their historic uses, such as providing loans to employees or opportunities for wealth creation through long-term investment schemes, have been substantially curtailed.

However, the use of EBTs as a vehicle for employee ownership had a welcome boost following the Nuttall report. As a result, new tax advantages were introduced in Finance Act 2014 for employee owners who dispose of their interests in companies to employee ownership trusts (EOTs). The employment tax effects are covered in the Exemption from tax for bonuses paid by qualifying companies guidance note.