Employee Benefit Trust

An Employee Benefit Trust (EBT) is a type of trust under which property (most commonly shares in the company, but sometimes cash) is held on behalf of employees.

Historically, EBTs were sometimes used as income tax avoidance vehicles. Legislation has now closed down these practices, but EBTs can still have a legitimate role in companies with an employee share scheme or employee ownership.

In the UK today EBTs are less common compared to Employee Ownership Trusts (EOTs). EOTs have become the preferred model for employee ownership due to their simplicity, tax advantages, and alignment with employee engagement goals.

How EBTs are Used

EBTs are particularly useful for:

• Holding a strategic block of shares long-term on behalf of employees.
• Buying shares from employees participating in a share scheme who wish to sell their shares - or need to, for example if they leave the company.
• Allocating shares flexibly to key employees, unlike an Employee Ownership Trust (EOT), which must benefit all employees equally.

Want to explore whether an Employee Benefit Trust or other employee ownership option is right for your business? Contact our team today for an free initial consultation and expert guidance.