Employee benefit trusts (EBTs) are discretionary trusts for the benefit of employees. For more information regarding EBTs generally, see Practice Note: What is an employee benefit trust?
Some EBTs are established offshore (ie are non-UK resident) and some are established on-shore (ie are UK resident).
Companies often opt to use on-shore EBTs for cost reasons, particularly if the trustee’s duties are both simple and infrequent. In addition, an EBT used in connection with a share incentive plan (SIP) must be a UK trust. However, in other cases there are a number of commercial and tax reasons for establishing an EBT offshore, including:
the trustee sector in many offshore jurisdictions is very well advanced, offering companies a very useful outsourced service for administrating their EBTs
the range of independent trustees can help to avoid some of the issues that can be problematic for trusts that are established using company personnel, and
the tax position can be significantly more advantageous for an offshore EBT
On-shore EBTs are subject
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