Employee Benefit Trusts (EBTs) are discretioanary trusts created by funds provided by employers for the benefit of their employees, past, present or future. In addition, benefits may be provided to dependents and other such employees.
Benefits provided by an EBT can be in the form of cash distributions, loans and via the buying, holding and distribution of shares in the employer company.
EBTs are sometimes known by other names such as Employee Share Ownership Trusts if, as in the case of an ESOT, the trust is being used to facilitate an employee share scheme.
Why use an Employee Benefit Trust?
There are a number of advantages that can be realised by an employer using an EBT, including:
To attract, retain and motivate employees
To provide employees with a tax efficient, long term savings plan
To enable the payment of discretionary bonuses to reward employees
To provide employees with interest free or interest bearing loans
To create a market for shares which would otherwise not exist
Funding an Employee Benefit Trust
An EBT is normally funded by an initial contribution from an employing company plus a series of periodic contributions. Such contributions are at the discretion of the employing company. For UK tax purposes contributions are not generally allowed as a corporation tax deduction until a taxable benefit is conferred on an employee.
Advantages of a Jersey Employee Benefit Trust
Using a Jersey resident EBT has a number of advantages which its onshore counterpart cannot offer, for example:
A Jersey EBT would only be subject to UK tax on UK source income
Trust income and gains can accrue gross in the offshore trust
Any gains realised by the trust will not be subject to UK capital gains tax
The trust should not be subject to Jersey income tax
There are no capital taxes in Jersey
The deferment of tax results in a larger fund from which to pay benefits
Conclusion
An EBT provides employers with a well established and flexible means of providing benefits to employees that can be used to incentivise and reward individuals.
By establishing a Jersey EBT with Lutea such benefits can be delivered in a tax and cost efficient manner. Lutea is recognised as a first class provider of professional trustee services and has the requisite knowledge and experience to provide clients with their required EBT solution.
