Global > United Kingdom >  Services > Tax > Budget 2007 > Contributions to employee benefit trusts
 

Contributions to employee benefit trusts

Some companies pay remuneration to employees via employee benefit trusts (EBTs). The general rule is that the companies will not get a tax deduction for the payment to the EBT unless the trust pays the employees within nine months of the company’s year end in a taxable form. If the EBT pays the employees later, the tax deduction is deferred until that later time.

Employers have attempted to side-step these rules by declaring a trust over assets which they already control, such as funds held in a bank account. They have then claimed a tax deduction for the value of that declaration.

Legislation will be introduced to put beyond doubt that such a declaration of trust will not create an immediate tax deduction. In addition, new rules will catch an act or omission of an employer that increase the value of the property already held by the EBT.