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HMRC internal manual

Employment Income Manual

HM Revenue & Customs
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Employee Ownership Trusts – qualifying bonus payments: The indirect employee-ownership requirement – the all-employee benefit requirement

Section 312E ITEPA 2003


The all-employee benefit requirement places restrictions on the use of the property held by the trustees if the company wishes to make qualifying bonus payments.  The conditions which are necessary to meet this requirement are detailed in sections 236J and 236K Taxation of Capital Gains Act 1992 (TCGA).  Broadly these conditions in section 236J are met if the trusts:-

  • Only permit the settled property to be used for the benefit of all eligible employees on the same terms
  • do not permit the trustees to create any sub trusts or transfer property to the trustees of any other settlement (other than via an authorised transfer, which would be a transfer to the trustees of a settlement which meets the controlling interest and all-employee benefit requirements immediately after the transfer)
  • do not permit the trustees to make loans to beneficiaries of the trust
  • do not permit the trustees or anyone else to amend the trusts so that any of these restrictions are removed.

The conditions in section 236K revolve around the use of the settled property in the trust.  The most important of these mirror the equality requirement detailed in s312C (see EIM02514). 

It may be that a trust does not meet the all-employee benefit condition throughout the qualifying period.  If so the provisions of s236L TCGA 1992 can apply to treat the condition as met.  Broadly the trust must:

Have been created before 10 December 2013

Have held on 10 December 2013 a more than 10% interest in the company; and

Have fully complied in practice with the equality requirement in s236J TCGA 1992 throughout the 12 months preceding the payment of the bonus (even if not required to do so under the terms of the trust)

This provision only applies if the trust did not meet the all-employee benefit requirement on 10 December 2013, and has not met it in any period between that date and the date when the trust first met the all-employee benefit requirement. This means that once a trust has met the all-employee benefit requirement it must continue to do so in order for the income tax exemption for the bonus to apply.