Business Owners, who are thinking of establishing an employee benefit trust [EBT] as part of their tax mitigation strategy, find it difficult to obtain appropriate advice on "best practice" as opposed to ‘commission led’ product advice. Employee Benefit Trusts are a much specialised subject and very few people are able to give the proper advice that you require at an economic cost.
The first objective is to for us to determine with you, what you, the Business Owner wishes to achieve, your objectives for you and your business and whether this might best be achieved by using an EBT as part of your tax planning strategy,
Basically an employee benefit trust is set up by a company that wishes to provide enhanced benefits to its employees. It can be an excellent mechanism, for this but you need advice to ensure that you extract the maximum efficiency from the arrangement. You need advice on the employee benefit trust on such matters as:
• In which jurisdiction is the trust going to be resident?
• Establish and obtain advice on the tax treatment of the contributions
• The way that the benefits will be taxed when they emerge from the trust
People seeking advice on setting up such a trust find several of the ‘experts’ have made it seem like a cure all for their taxation ills. It is not. It can become an administrative nightmare
Without proper advice, an employee benefit trust can become a "millstone" around the neck of your company. The principal uses of employee benefit trusts include:
• For tax efficient succession planning
• For the provision of tax efficient loans to Directors and
• Enhanced EBT’s can be used to shelter investment gains subject to certain conditions
The advice on employee benefit trust from your tax advisor should cover such matters as:
• Funding
• the consequences of beneficial loans
• Inheritance Tax
• Other tax mitigation
In short an employee benefit trust set up and run properly with proper administration in place is a benefit to a company. Without advice it will become a nightmare to the owners.
It is to be stressed that the average accountant and IFA is totally unaware of the dangers and of most opportunities of these trusts. Most will just rely on ‘standard’ documentation, find you a Trustee whose efficiency is not known, pocket a substantial fee and leave you to "sink or swim" on your own.
So if you are thinking of setting up such a trust, you will require advice on employee benefit trusts. We have more than 30 years experience of setting up such trusts ranging from companies with 3 or 4 employees up to large corporates.
If you would like further advice please call for a no obligation initial discussion to discover how you might mitigate the effects of paying tax at 61% from April 2010, please contact us or ask for a free fact sheet.
Asset Preservation Partnership LLP
Woodlands Farm Cottage, Woodlands Lane
Windlesham Surrey-GU20 6AT UK