This type of employer-funded discretionary trust for the benefit of employees had been used historically to build up value free of income tax charges on the employees and in some cases, without charge to Class 1 NIC, though has since been challenged strongly (and, in most cases, successfully) by HMRC.
The Rangers case (see E4.1219B for additional analysis) showed that a payment, made as a direct reward for employment services, attracted PAYE tax and NIC, even though it was paid initially to a third party EBT.
The subsequent third party benefit ('disguised remuneration') rules that apply from 9 December 2010 (see E4.1051) are also likely to impose income tax and NICs on payments and benefits provided through an EBT which do not otherwise fall within the PAYE and NIC rules.
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