An employee benefit trust is a discretionary trust a company funds for the benefit of its workforce — and few structures in UK tax carry more baggage per word. Used properly, an EBT is unremarkable corporate plumbing: warehousing shares for option schemes, buying out leavers, making an internal market in a private company's equity. Used the way a generation of promoters sold them — as conduits for "loans" that were really salary — they produced the disguised remuneration rules, the loan charge, and fifteen years of litigation that is only now, in 2026, reaching a settlement endgame. Both halves of the story matter, because both are live.
The legitimate EBT: share plumbing
Growing companies with share schemes need a warehouse: somewhere to hold shares for future option exercises, somewhere to buy shares back from departing employees without a capital reduction, a counterparty for an internal market so staff can realise value between funding rounds. That is what EBTs are for. The trustee (often professional, sometimes offshore for administrative reasons that are legitimate in themselves) holds shares; the company funds it; employees benefit through the schemes — EMI, CSOP, growth shares — that the trust services.
Even the clean version has technical edges that need managing: funding the trust is not, by itself, deductible — under section 1290 of the Corporation Tax Act 2009 the company gets a deduction only as qualifying benefits are paid out of the contributions (broadly, payments that bear both income tax and National Insurance, or termination payments; loans never count), and nothing for a period starting more than 5 years after the contribution; most EBTs sit in the relevant property IHT regime with ten-year and exit charges unless the employee-trust conditions in section 86 of the Inheritance Tax Act 1984 are met; and contributions by a close company can be transfers of value apportioned to its participators unless the section 13 conditions apply. An EBT is also not an employee ownership trust — the EOT is a statutory all-employee vehicle with its own reliefs and a controlling-interest requirement; the terms get swapped constantly and describe different animals.
The abusive EBT: how we got the loan charge
The 2000s scheme was simple: employer pays a bonus into an EBT; trust "lends" it to the employee; loan never repaid; no PAYE, allegedly. The Supreme Court demolished the logic in the Rangers case — redirecting earnings through a trust does not stop them being earnings — and Parliament had already legislated the disguised remuneration rules in Part 7A of ITEPA 2003: where a third party like an EBT trustee loans money, earmarks funds or makes assets available in connection with employment, the value is taxed as employment income. Then came the 2019 loan charge, taxing scheme loans still outstanding at 5 April 2019 in one year — and with it years of controversy over retrospection and the human cost, softened once by the Morse review and litigated politically ever since.
2026: the settlement endgame is actually here
This is the part anyone with loan charge exposure needs current: the independent review commissioned in 2025 reported, the government responded at Budget 2025, and a statutory settlement scheme is now live. It sits in sections 25 to 27 of the Finance Act 2026 and SI 2026/821, in force since 5 August 2026, and HMRC has started sending offers to the roughly 32,000 people with an outstanding liability. The terms are materially softer than anything previously available: the tax is recalculated as if the income had been taxed in the years it was received, with a deduction for promoter fees, a further £5,000 deducted, late payment interest removed and the total reduction capped at £70,000. Unpaid inheritance tax on the scheme trusts is written off only if it has already arisen or arises within 3 months of the offer date; later charges still have to be paid. Most penalties are not included in the offer: HMRC says it will charge penalties only in exceptional cases, such as deliberate and concealed inaccuracies. If you cannot pay at once, instalments run for up to 5 years, or longer depending on your circumstances, with interest. The loan charge itself has not been repealed. A first offer stays open for at least 90 days, and you must sign and return the acceptance form even if the amount due is £0. Our loan charge guide walks through the calculation and deadlines, so anyone in scope should be getting advice on their specific numbers now rather than filing the envelope. Sources: HMRC's settlement scheme guidance and implementation guidance.
Equally current: promoters have not retired. HMRC's spotlight publications keep flagging fresh trust-and-loan variants sold to contractors and owner-managers as "HMRC-compliant". The heuristic that survives every rebrand — if a structure delivers your own earnings back to you untaxed via a trust, a loan, an annuity or a fiduciary re-description, it is the same scheme in new clothes, and the eventual bill lands on you, not the promoter.
If you have an EBT — either kind
For the legitimate share-warehouse EBT, the maintenance list is short: trustee minutes and accounts current, the IHT ten-year anniversary diarised and calculated, contributions tracked against the deferred-deduction rules, and the trust's role documented within the wider share scheme architecture. For legacy loan arrangements, the sequence is: establish exactly what is outstanding and which years are in scope, model the new settlement terms against your facts, check whether the trust could still trigger inheritance tax charges after the 3-month window, and respond to any offer within its deadline with advice. The settlement terms are now set by legislation rather than negotiated case by case, which cuts both ways.
Acumon advises on both faces of this structure — trust compliance and trust tax for working EBTs, and loan charge settlement support through our HMRC investigations team for the legacy cases. If a settlement offer is already on your desk, the deadline in the letter is running; start there.