Government consultation on “safe harbour” Employee Benefit Trust (EBT)

Posted by admin at 15:51 on 13 Feb 2017

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Does your private company use an EBT? Or have you considered using one, but decided against it?

The government is seeking feedback from businesses about EBTs. This is part of an ongoing project to make it easier, especially for private companies, to put in place employee share plans.

Many of our clients - especially private companies - consider using EBTs for very practical reasons, e.g. to create an internal market, or a warehouse, or to ring-fence a set amount of share capital for employees.

Sadly, many are put off by the apparent complexity of setting up an EBT - and others are concerned about the EBT’s reputation as a tax avoidance vehicle. 

If this applies to you, there is an opportunity for you to help change the law on EBTs. If your answer to any of the questions below is 'Yes', please visit the consultation document and respond by Friday 10th October 2014:

  • Do you think any of the following causes complexity & administrative costs in running an EBT: inheritance tax risks, Capital Gains Tax (CGT)/Income Tax charges; loans to finance the trust; transaction in securities rules; stamp duty reserve tax; disguised remuneration?
  • Have you set up, or considered setting up, an offshore trust because of the ”double taxation” charge that applies to onshore trusts (CGT on the trust, Income Tax on the employees)
  • If your company has loaned money to the EBT to help finance it, has the section 455 charge (sometimes known as “ACT”) caused cash flow issues?
  • Have the “disguised remuneration” rules (including “earmarking”) caused any difficulties for you in operating or establishing an EBT?
  • Are there any other tax issues – e.g. transactions in securities, stamp duty/stamp duty reserve tax - that have caused complications for you when setting up an EBT?
  • If a simple vehicle was created to get round these complexities, would you consider using one?