What is an Employee Benefit Trust (EBT)?

An Employee Benefit Trust (or EBT) is a trust under which property (very often shares in the company which the employees work for, but sometimes also cash) is held on their behalf.

In the past, Employee Benefit Trusts have been used as income tax avoidance devices. Legislation has now closed this down, but EBTs have an entirely legitimate role in companies which have an employee share scheme or employee ownership, in particular:

  • the long term holding of a strategic block of shares on behalf of employees
  • buying shares from employees participating in an employee share scheme who wish to sell their shares (or have to because they are leaving their company)
  • whereas an Employee Ownership Trust (EOT) must confer benefit to all employees on the same terms, an EBT allows more flexibility, for example allocating shares to key employees.

An explanation of how a company can be owned through a trust can be found here: Trust Ownership

More information about alternative routes to employee share ownership can be found here: Employee Share Schemes

In the present difficult economic climate are you asking, “What can we do to maximise our chances of survival and bouncing back?”

We suggest that you read our short guide, in which we look at the role employee ownership can play: Employee Ownership and Business Recovery

Robert Postlethwaite of Postlethwaite Employee Ownership & Share Schemes Solicitors

If you would like to explore how employee ownership or an employee share scheme could work for your company, please contact us today.