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EBT/EOT—tax treatment


Employee benefit trusts (EBTs) are discretionary trusts for the benefit of employees. For more information regarding EBTs generally, see Practice Note: What is an employee benefit trust?

On-shore versus offshore EBTs

Some EBTs are established offshore (ie are non-UK resident) and some are established on-shore (ie are UK resident).

Companies often opt to use on-shore EBTs for cost reasons, particularly if the trustee’s duties are both simple and infrequent. In addition, an EBT used in connection with a share incentive plan (SIP) must be a UK trust. However, in other cases there are a number of commercial and tax reasons for establishing an EBT offshore, including:

  1. •

    the trustee sector in many offshore jurisdictions is very well advanced, offering companies a very useful outsourced service for administrating their EBTs

  2. •

    the range of independent trustees can help to avoid some of the issues that can be problematic for trusts that are established using company personnel, and

  3. •

    the tax position can be significantly more advantageous for an offshore EBT

Tax position of trustees of an EBT

Income tax for on-shore EBTs

On-shore EBTs are subject

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