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HMRC internal manual

Inheritance Tax Manual

HM Revenue & Customs
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Employee benefit trusts: conditions for relief: probationers and other limitations on eligibility

Some employee benefit trusts impose a qualifying period of service before an employee is eligible to benefit. For example, the employee may need to have served at least 12 months with the company. Provided that those who are not yet eligible to benefit do not represent a majority of the employees (so the ‘all or most’ test is still satisfied), IHTA84/S86(3) will not be infringed. It would be unusual to for a company to adopt a qualifying period of probation which would exclude more than half of its employees.

Qualifying Employee Share Ownership Trusts (QUESTS) are trusts that meet the conditions set out in FA89/Sch5 and impose a qualifying period of service condition which can be up to 5 years. QUESTS do not automatically satisfy IHTA84/S86 and the factual ‘all or most’ test still has to be satisfied (IHTM42915).