Taxation of Chargeable Gains Act 1992 section 236L

Cases in which all-employee benefit requirement treated as met

Section 236L provides a transitional rule allowing certain employee benefit trusts that existed before 10 December 2013 to be treated as meeting the all-employee benefit requirement, even though their trust terms would not otherwise satisfy it, provided the trustees behave as though the requirement were met.

• The section applies only to settlements created before 10 December 2013 where the trust qualified under section 86 of the Inheritance Tax Act 1984, the trustees held a significant interest (at least 10%) in the company, and the trust could not meet the all-employee benefit requirement on its own terms.
• In the 12 months before any relevant disposal, the trustees must not apply trust property other than for the equal benefit of all eligible employees, must not create sub-trusts or make unauthorised transfers, and must not make loans to beneficiaries.
• The trustees may still distribute to a deceased employee's surviving spouse, civil partner or dependant for up to 12 months, impose a minimum service period of up to 12 months, honour written opt-out requests, exclude office-holders if the trust terms require it, and apply property for charitable purposes — all without breaching the requirement.
• Where benefits are varied by reference to remuneration, length of service or hours worked, each factor must generate a separate entitlement and no eligible employee may be left with no benefit at all.