Chapter EIM45125
| Published date | 22 May 2014 |
| Record Number | EIM45125 |
| Court | HM Revenue & Customs |
| Issuer | HM Revenue & Customs |
Example: bonus
Example: deferred bonus
Example: asset reallocated
Example: earmarking followed by clarification
Example: existing sub-fund
Example: change of trustees
Here are some examples involving EBTs.
The EBT arrangement will meet condition 1 and either condition 2 or condition 3 in EIM45025. And the trustees will be a relevant third person.
For other examples involving loans, see EIM45120.
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Example: bonusAfter 5 April 2011, the trustees of an EBT pay a productivity bonus of £1 million to an employee, A. This is not a loan; A does not have to repay the money.
This payment is a relevant step within Section 554C(1)(a).
The arrangement therefore comes through the Section 554A gateway.
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Example: deferred bonusA and his employer, B plc, enter into an incentive plan whereby, some years in the future, employee A will receive a performance-related bonus.
B plc has set up an EBT to administer its incentive plans.
After 5 April 2011, the trustees of the EBT foresee that, some years in the future, they may be called upon to pay A his performance-related bonus. So they earmark £1 million of trust funds with a view to making this future payment.
The earmarking is a relevant step within Section 554B.
The arrangement therefore comes through the Section 554A gateway even though, at this stage, A has not actually received his bonus and it is not known whether he ever will or, if he does, how much he will receive.
Whether the value of the relevant step (the £1 million earmarked) will count as employment income of A will depend on the terms of the incentive plan.
It may be that the exclusion for earmarking of deferred remuneration in Section 554H will prevent the relevant step from giving rise to Part 7A income. See EIM45255 onwards.
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Example: asset reallocatedThe trustees of an EBT earmark an asset before 5 April 2011.
After 5 April 2011, the trustees earmark, provide or otherwise make available the asset in a way which comes within Section 554B, 554C or 554D.
The original allocation does not give rise to Part 7A income, because the Part 7A rules were not in force at that time.
The earmarking, provision or making available of the asset after 5 April 2011 is a relevant step, and will give rise to Part 7A income.
Whether or not the trustees have earmarked or made the asset available before is irrelevant. But see EIM45935 onwards for the reduction in the value of the relevant step that may apply if...
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