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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Specific deductions: employee benefit trusts: contents

Some employee benefit trusts (EBTs) are set up to provide employees and directors with specific kinds of benefits such as shares in their employing company, pensions and other retirement benefits, accident benefits or healthcare benefits. However general-purpose EBTs have increasingly been used for avoidance purposes, with the aim of providing employees and directors with benefits in ways that aim to minimise or avoid liability to Income Tax (including PAYE) and employers’ National Insurance Contributions (NICs).

In many cases the main risk may relate to Income Tax under PAYE and NICs due on amounts paid out of the EBT, rather than the availability of a Corporation Tax deduction (at some time) for the employer’s contribution. It is therefore important that staff considering deductions for employers’ contributions liaise with employer compliance staff so that all aspects of the case are considered together.

There may also be Inheritance Tax consequences if a deduction for a contribution made by a close company to an EBT is disallowed or deferred in computing the company’s taxable profits. In these cases staff considering deductions for employers’ contributions should liaise with Specialist PT (IHT), see BIM44550.

A full list of the contents of the guidance on deductions for employers’ contributions to EBTs is shown below. The guidance is subdivided into three main sections:

  • General Matters (BIM44501 - BIM44549);
  • Deductions for employers’ contributions to general-purpose EBTs (BIM44540);
  • Timing of deductions for employers’ contributions to general-purpose EBTs (BIM44573).
  1. BIM44501
    Introduction
  2. BIM44505
    Setting up costs
  3. BIM44510
    Main uses
  4. BIM44515
    Used with employee share schemes
  5. BIM44520
    Used with retirement benefit schemes
  6. BIM44525
    Used with accident benefit schemes
  7. BIM44530
    Used with healthcare trusts
  8. BIM44535
    General-purpose EBTs
  9. BIM44540
    General-purpose EBTs: deductions for employers’ contributions: contents
  10. BIM44550
    General-purpose EBTs: deductions for employers’ contributions: introduction
  11. BIM44555
    General-purpose EBTs: deductions for employers’ contributions: how to spot them
  12. BIM44560
    General-purpose EBTs: deductions for employers’ contributions: capital or revenue expenditure
  13. BIM44565
    General-purpose EBTs: deductions for employers’ contributions: whether wholly and exclusively
  14. BIM44570
    General-purpose EBTs: deductions for employers’ contributions: timing of deductions
  15. BIM44573
    General-purpose EBTs: timing of deductions for employers’ contributions: contents
  16. BIM44575
    General-purpose EBTs: timing of deductions for employers’ contributions: introduction
  17. BIM44580
    General-purpose EBTs: timing of deductions for employers’ contributions: overview
  18. BIM44585
    General-purpose EBTs: timing of deductions for employers’ contributions: what it applies to
  19. BIM44590
    General-purpose EBTs: timing of deductions for employers’ contributions: structure of the legislation
  20. BIM44595
    General-purpose EBTs: timing of deductions for employers’ contributions: qualifying benefits
  21. BIM44600
    General-purpose EBTs: timing of deductions for employers’ contributions: qualifying expenses
  22. BIM44605
    General-purpose EBTs: timing of deductions for employers’ contributions: computing adjustments
  23. BIM44610
    General-purpose EBTs: timing of deductions for employers’ contributions: computing adjustments: example
  24. BIM44615
    General-purpose EBTs: timing of deductions for employers’ contributions: payments ‘out of’ contributions
  25. BIM44620
    General-purpose EBTs: timing of deductions for employers’ contributions: transfers of assets to employees
  26. BIM44630
    General-purpose EBTs: timing of deductions for employers’ contributions: interaction of Corporation Tax rules with employee share schemes deductions
  27. BIM44635
    General-purpose EBTs: timing of deductions for employers’ contributions: interaction with unpaid remuneration rules
  28. BIM44636
    General-purpose EBTs: timing of deductions for employers’ contributions: disguised remuneration