Taxation of Chargeable Gains Act 1992 section 236J

All-employee benefit requirement

Section 236J sets out the conditions that an employee ownership trust must satisfy in order to meet the all-employee benefit requirement, including rules on how trust property may be used, who qualifies as an eligible employee, and which participators are excluded from benefiting.

• The trust must apply its property solely for the benefit of all eligible employees on equal terms, and must not create sub-trusts, transfer property to other settlements (except by authorised transfer), or make loans to beneficiaries.
• Eligible employees are all employees and office-holders of the company (or of every group member where the company heads a group), but individuals who are "excluded participators" — broadly, those holding 5% or more of the shares or winding-up entitlement in relevant companies, or persons connected with them — cannot be eligible employees.
• Where the company ceases to meet the trading requirement or the trustees no longer hold shares in it, anyone who was an eligible employee at any time in the preceding two years remains an eligible employee, so that residual trust assets can still be distributed fairly.
• The trust deed must not allow the trustees or anyone else to amend the trust terms in a way that would breach any of these conditions, and all restrictions apply equally to income arising from the settled property.