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HMRC internal manual

Capital Gains Manual

Reliefs: employee-ownership trusts: conditions: the 'all-employee benefit requirement'

TCGA92/S236J(1) and (8)

A settlement meets the ‘all-employee benefit requirement’ if the trusts of the settlement do not permit

  • any of the settled property to be applied, at any time, otherwise than for the benefit of all the eligible employees on the same terms (the ‘equality requirement’),
  • the trustees, at any time, to apply any of the settled property
    • by creating a trust, or
    • by transferring property to the trustees of any settlement other than by an ‘authorised transfer’, see CG67836,
  • the trustees, at any time, to make loans to beneficiaries of the trusts, or
  • the trustees or any other person, at any time, to amend the trusts in a way such that the amended trusts would not comply with one or more of the three conditions above.

Example 6

The trust deed of the Elmuthalleth Widgets Limited EOT permits the trustees to make loans to employees in the event of hardship.  Although the trusts of the EOT meet the other requirements, the settlement does not actually meet the ‘all-employee benefit requirement’.  No relief will be due on transfers of shares to the EOT.

In certain cases, see CG67844, a settlement that would not otherwise meet the ‘all-employee benefit requirement’ is treated as meeting that requirement. This can happen only if the trustees meet the ‘behaviour requirement’.  The existence of this alternative requirement means that some settlements created before the legislation was published can be treated as EOTs, subject to their trustees behaving over a specified period as though the settlement met the ‘all-employee benefit requirement’.

For the purposes of the ‘all-employee benefit requirement’ references to settled property include references to any income arising from it.