Employee Benefit Trusts ("EBTs") incorporating an independent offshore trustee can fulfil a number of roles for companies seeking to mitigate taxes and retain, motivate and stretch the client's management team by a well structured and efficiently administered remuneration package. The benefits of EBTs can be summarised as follows:
Tax efficient incentive mechanism for delivering equity
participation to employees as part of a competitive incentive
package. Offshore trust investment returns are tax free and
trust assets are currently efficient inheritance tax planning tools
for UK domiciled employees and so can provide long term
incentives in this regard. This enhances the company's ability
to attract and retain key executives.
Joint participation in the company's equity for those employees
who are bound by certain trigger events can be an effective
'lock-in period' retention tool.
Creating a market in the illiquid shares as part of a share
Hedge the company's exposure to its own share price prior
to vesting incentives, by holding or "warehousing" shares in
Taking the assets off the employer's balance sheet and out
of the hands of any potential creditors of the company, thus
providing security to key executives.