Part VII

Other property, businesses, investments etc.

Employee-ownership trusts

Cases in which all-employee benefit requirement treated as met
236L
1
A settlement which would not otherwise meet the all-employee benefit requirement at any time is treated as meeting that requirement at that time if—
a
the settlement was created before 10 December 2013,
b
on that date—
i
section 86 of the Inheritance Tax Act 1984 (trusts for the benefit of employees) applied to the settled property,
ii
the trustees held a significant interest in C, and
iii
the settlement did not meet the all-employee benefit requirement (ignoring this section), and
c
the trustees of the settlement do not, during the period of 12 months ending with the time in question, do any of the following—
i
apply any of the settled property otherwise than for the benefit of all eligible employees on the same terms,
ii
apply any of the settled property by creating a trust,
iii
apply any of the settled property by transferring property to the trustees of any settlement other than by an authorised transfer, or
iv
make loans to beneficiaries of the trusts of the settlement.
2
The trustees held a significant interest in C on 10 December 2013 if on that date—
a
they—
i
held 10% or more of the ordinary share capital of C, and
ii
had powers of voting on all questions affecting C as a whole which, if exercised, would have yielded 10% or more of the votes capable of being exercised on them,
b
they were entitled to 10% or more of the profits available for distribution to the equity holders of C,
c
they would have been entitled, on a winding up of C, to 10% or more of the assets of C available for distribution to equity holders, and
d
there were no provisions in any agreement or instrument affecting C’s constitution or management or its shares or securities whereby the condition in paragraph (a), (b) or (c) could cease to be satisfied without the consent of the trustees.
See section 236T for further provision relating to the holding of a significant interest.
3
Subsections (3) to (8) of section 236J apply for the purposes of this section.
4
The requirement in subsection (1)(c)(i) (“the behaviour requirement”) is not infringed by reason only that the trustees of the settlement—
a
apply any of the settled property, where an eligible employee has died, as if a surviving spouse, civil partner or dependant of the deceased person were the eligible employee (and continued to be employed) for a period of 12 months, or such shorter period as the trustees may determine, starting with the time of death,
b
only apply the settled property for the benefit of persons who have been eligible employees for a continuous period of 12 months or such shorter period as the trustees may determine,
c
comply with a written request from a person that the trustees do not apply any of the settled property for the benefit of that person, or
d
have complied with the terms of the trusts of the settlement which prevent the settled property being applied for the benefit of some or all of the persons who are eligible employees by reason only that they are office-holders.
5
The behaviour requirement is not infringed by reason only that, in addition to applying any of the settled property for the benefit of all the eligible employees on the same terms, the trustees also apply any of it for charitable purposes.
6
Subject to subsections (4) and (5), the behaviour requirement is infringed by the trustees if they apply the settled property by reference to factors other than those mentioned in subsection (7).
7
The behaviour requirement is not infringed by the trustees applying the settled property for the benefit of all the eligible employees by reference to—
a
an eligible employee’s remuneration,
b
an eligible employee’s length of service, or
c
hours worked by an eligible employee;
but this is subject to subsections (8) and (9).
8
The behaviour requirement is infringed if any of the settled property is applied by the trustees on terms such that some (but not all) eligible employees receive no benefits (other than as mentioned in subsection (4)(b), (c) and (d)).
9
If the trustees apply any of the settled property by reference to more than one of the factors mentioned in subsection (7), the behaviour requirement is infringed unless—
a
each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and
b
the total entitlement is the sum of those separate entitlements.
S. 236L applied by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 312E(3) (as inserted (with effect in accordance with Sch. 37 para. 8 of the amending Act) by Finance Act 2014 (c. 26), Sch. 37 para. 5)
Ss. 236H-236U and cross-heading inserted (with effect in accordance with Sch. 37 para. 2 of the amending Act) by Finance Act 2014 (c. 26), Sch. 37 para. 1 (with Sch. 37 paras. 3, 4)