A Jersey employee benefit trust ("EBT") is cost
effective to set up and with a wide range of options and benefits
available, it is an attractive solution for employers seeking to
incentivise their employees.
Employee Benefit Trust
In short, an EBT is a discretionary trust set up for the purpose
of benefitting employees. It is otherwise known as an employee
share ownership plan or an employee share trust. As with any other
discretionary trust, the EBT has a trustee and beneficiaries, with
the employees of the company being the beneficiaries. The company
will have an important role to play regarding the choice of trustee
and in relation to ensuring that the trust is established in the
right way to benefit its employees.
How does it work?
As a typical example, the parent or employing company
establishes a discretionary trust and appoints a professional
trustee, which can be based in Jersey. The discretionary trust deed
is sometimes accompanied by scheme rules which set out the
conditions that must be satisfied before a beneficiary can benefit.
The trustee usually then creates a series of separately
identifiable sub-funds with each sub-fund being for the benefit of
a particular employee and his family.
Upon the establishment of the trust, the trustee will tend to
work with the company and the relevant employee to determine when
and how benefits will be made.
Benefits of an EBT
Can be used where a company wishes to create more
liquidity and thereby make share ownership more meaningful for its
Help to increase productivity and other positive
Donations to the trust by the company may be deductible
for corporation tax purposes;
Potential reduction in company costs, such as social
Creates a mechanism for employee share plans, and with
a private company it can be used to buy shares from shareholders
who want an exit or from employees who wish to leave the
Can be used to own shares in a trading company which
provides the staff with a stake in the business and via the
trustees, a voice in the direction of the business;
Acting as a warehouse for shares;
Growth of pre-tax contributions within a tax favoured
There could be income tax, social security and capital
gains tax benefits for employees.
There are a number of incentive arrangements, which may differ
depending upon the nature of the company or the requirements of the
employees. These incentive arrangements are often serviced by an
EBT and the benefits include investment flexibility, tax planning
and deferral. Whilst there is a wide variety of different
incentives, below is a list of possible arrangements:
Share option plans;
Long and short term performance incentive
Bonus conversion plans;
Employee stock purchase plans;
Discretionary cash awards plans;
Corporate and employee nominee services;
Phantom share option schemes; and
Loans – interest free or on favourable
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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