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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Reliefs: employee-ownership trusts: conditions: the 'all-employee benefit requirement'

TCGA92/S236H(4)(b) and (5) and FA14/Sch 37, Para 3(a)

Provide that the settlement must meet the ‘all-employee benefit requirement’

  • at the time of the disposal and
  • for the remainder of the tax year in which that time falls.

The settlement can actually meet this requirement, see CG67835, or be treated as meeting it, see CG67845.

For the purposes of this requirement, the settlement cannot be treated as meeting it after the time of the disposal unless it was treated as meeting the requirement at that time.  In other words, if the settlement actually met the requirement at the time of the disposal and it has subsequently ceased to actually meet it, the fact that the settlement could be treated as meeting the requirement is not enough to allow relief.

Example 1

The Alpheratz Widgets Limited EOT acquired all the shares in Alpheratz Widgets Limited on 6 October 2014, at which time it was treated as meeting the ‘all-employee benefit requirement’.  From 3 November 2014 to 2 February 2015 the EOT actually met the requirement, but then ceased to do so.  Even though it could, in the absence of the restriction, subsequently be treated as meeting the requirement, it cannot be so treated as it actually met the requirement from 3 November 2014 to 2 February 2015.

Where the transitional rules apply, see CG67880, the settlement has to meet the ‘all-employee benefit requirement’ only at the time of the disposal.  In these cases, the ‘disqualifying event’ rules, see CG67860 to CG67862, ensure that it continues to be met at later times.