preventing former owners from maintaining control over an EOT-owned company post-sale by appointing themselves to the EOT trustee board, will avoid conflicts of interest and deter abuse;
requiring the EOT trustee board to include members from specific groups such as employees or independent individuals requires caution, but a minimum level of employee involvement could be a more workable solution (and help ensure employee engagement);
requiring the trustees of an EOT to be UK resident as a single body should remove the possibility of abuse of the rules;
allowing the exclusion of directors/office holders from EOT bonuses would seem a sensible default position (and welcome simplification); and
the £3,600 employee tax-free bonus limit should be indexed for inflation, and disregarded for NICs purposes (so that the bonus is income tax and NIC free).
EBTs:
putting connected person restrictions into legislation would bring clarity, and the rules should also consider the position of EBTs which are used as a tax-free vehicle for company shares passed down the generations;
the proposed 25% limit on the number of employees connected to participators seems arbitrary and inconsistent with the 50% limit for EOTs - if the intention is to restrict the use of EBTs in place of family trusts, the government may decide to prevent participators and connected persons (e.g. family members) from benefiting at all; and
consideration should be given to requiring EBTs to be UK resident.
preventing former owners from maintaining control over an EOT-owned company post-sale by appointing themselves to the EOT trustee board, will avoid conflicts of interest and deter abuse;
requiring the EOT trustee board to include members from specific groups such as employees or independent individuals requires caution, but a minimum level of employee involvement could be a more workable solution (and help ensure employee engagement);
requiring the trustees of an EOT to be UK resident as a single body should remove the possibility of abuse of the rules;
allowing the exclusion of directors/office holders from EOT bonuses would seem a sensible default position (and welcome simplification); and
the £3,600 employee tax-free bonus limit should be indexed for inflation, and disregarded for NICs purposes (so that the bonus is income tax and NIC free).
EBTs:
putting connected person restrictions into legislation would bring clarity, and the rules should also consider the position of EBTs which are used as a tax-free vehicle for company shares passed down the generations;
the proposed 25% limit on the number of employees connected to participators seems arbitrary and inconsistent with the 50% limit for EOTs - if the intention is to restrict the use of EBTs in place of family trusts, the government may decide to prevent participators and connected persons (e.g. family members) from benefiting at all; and
consideration should be given to requiring EBTs to be UK resident.
