An Employee Benefit Trust is a discretionary trust set up by a company to hold assets — typically cash, shares or share options — for the benefit of its employees and their families. Trustees manage the trust independently and decide how and when to distribute benefits. EBTs are commonly used to administer share schemes, deferred bonus arrangements, or provide welfare benefits to a wide group of employees. Modern UK tax law heavily restricts using EBTs purely for tax avoidance — most simple “tax planning” use is now caught by anti-avoidance rules under Part 7A ITEPA 2003.

Yes, EBTs remain legal in 2026 — but their tax treatment has been significantly tightened. The Finance Act 2011 introduced the disguised remuneration rules, the 2019 Loan Charge addressed historic outstanding loans, the Autumn Budget 2024 restricted close company funding, and the Autumn Budget 2025 cut EOT CGT relief from 100% to 50% for disposals after 26 November 2025. Legitimate EBTs administering share schemes, LTIPs and genuine welfare benefits remain valid; aggressive tax planning EBTs are heavily restricted.

The 2019 Loan Charge was introduced via the Finance Act 2017 to address historic disguised remuneration schemes where employees received “loans” from EBTs that were never repaid. It taxed all outstanding loans on 5 April 2019 as employment income for the 2018-19 tax year, charged at marginal rates. Following the Morse Review, the scope was narrowed to loans from 9 December 2010 onwards. A current Loan Charge Review is underway as of January 2025, expected to conclude by summer 2025.

An EBT (Employee Benefit Trust) holds assets to reward and incentivise employees — typically used for share schemes and bonus deferral. An EOT (Employee Ownership Trust) is a specific statutory structure created in 2014 designed to transfer majority ownership of a company to its employees. EOTs offer a 50% CGT relief on qualifying disposals (reduced from 100% from 26 November 2025) and allow tax-free annual bonuses up to £3,600 per employee. EBTs are governed largely by trust law and case-by-case tax analysis; EOTs have a clear statutory regime.

Setting up a legitimate EBT typically costs £15,000-£50,000+ in initial professional fees (specialist tax counsel, corporate solicitors, trust deed drafting, accounting advice). Ongoing annual costs of £5,000-£20,000+ include trustee fees, annual compliance, tax returns, and HMRC enquiry response. For most SMEs, this cost outweighs the benefits — alternatives like business health insurance (£40-£80 per employee per month), salary sacrifice schemes, and trivial benefits offer better risk-adjusted value.

Technically yes, but it’s rarely advisable. The Autumn Budget 2024 restricted favourable tax treatment for EBT benefits funded by close companies (those controlled by 5 or fewer participators) from 30 October 2024 — affecting most owner-managed SMEs. Combined with the £15,000-£50,000+ setup costs, ongoing compliance burden, and HMRC scrutiny, modern alternatives like business health insurance, salary sacrifice and structured benefits packages provide significantly better outcomes for most small businesses.

If you have outstanding “loans” from a historic EBT scheme that were not settled by 30 September 2020 and weren’t paid the loan charge, you should contact HMRC immediately or seek specialist tax advice. The current Loan Charge Review may affect your position. HMRC has been issuing letters to affected individuals with caseworker contacts. Settlement is still possible but does not retroactively prevent the loan charge from applying. Specialist tax solicitors at firms like Patrick Cannon, Francis Wilks & Jones, and KANGS regularly handle these cases. Do not ignore HMRC correspondence about historic EBT involvement.

Yes, EBTs administering HMRC-approved share schemes (Share Incentive Plans, Save As You Earn, Enterprise Management Incentives, Company Share Option Plans) remain entirely legitimate and widely used. These structures have explicit statutory tax treatment and are not affected by the disguised remuneration rules. Most listed UK companies and many large private businesses use EBTs to administer their share schemes — this remains a perfectly valid commercial structure when properly set up and administered.

For most UK businesses with under 250 employees, the modern reward stack typically combines: business health insurance (£40-£80 per employee per month, P11D benefit), salary sacrifice schemes for NIC savings, trivial benefits allowance (£300/year tax-free per director in close companies), Employee Assistance Programmes, pension contributions, and HMRC-approved share schemes (SIP/EMI). This stack delivers comprehensive employee benefits with minimal HMRC risk and far lower setup costs than an EBT.

HMRC’s position post the 2017 Rangers Supreme Court case is that disguised remuneration through any structure (including EBTs) doesn’t work — money paid in return for work is taxable as employment income regardless of how it’s routed. HMRC actively investigates EBT structures using accelerated payment notices (APNs), follower notices, and the General Anti-Abuse Rule (GAAR). Legitimate share scheme EBTs are not in HMRC’s “cross-hairs” — but any EBT marketed as a tax avoidance vehicle is at very high risk of challenge.

EBT decisions require specialist qualified advice. Look for: a Chartered Tax Adviser (CTA) via the Chartered Institute of Taxation (CIOT) directory, a specialist tax solicitor (firms like Patrick Cannon, Francis Wilks & Jones, KANGS handle EBT/disguised remuneration cases), or a Big Four/mid-tier accountancy firm with a specialist tax planning team. Avoid any “tax adviser” or scheme promoter offering EBTs primarily as tax avoidance — these schemes have failed legally and the loan charge has crystallised the consequences. Always verify professional credentials via CIOT, ICAEW, or Law Society directories before proceeding.