Income Tax (Earnings and Pensions) Act 2003 Schedule 4 paragraph 13

Meaning of "associate": trustees of employee benefit trust

Paragraph 13 of Schedule 4 provides an important exception to the "associate" rules, so that trustees of an employee benefit trust are not automatically treated as associates of a beneficiary simply because that person has an interest in the trust.

• Where an individual is a beneficiary of an employee benefit trust holding shares or obligations of the relevant company, the trustees of that trust are not automatically treated as the individual's associates solely because of that beneficiary interest.
• This exception applies only if, at no time after 13th March 1989, the individual, the individual together with associates, or any associate (alone or with other associates) has beneficially owned or been able to control more than 30% of the ordinary share capital of the company, whether directly or indirectly.
• For the purposes of the 30% ownership test, "associate" keeps its normal meaning but specifically excludes the trustees of the employee benefit trust where the only reason for treating them as associates is the individual's interest in shares or obligations of the trust.
• The rules in Chapter 11 of Part 7 of the Act, which govern how interests in companies are attributed to beneficiaries of employee benefit trusts, apply when determining whether the 30% threshold has been breached, and "employee benefit trust" has the meaning given by sections 550 and 551 of the Act.