Employment Benefit Trust

With an Employment Benefit Trust (EBT) Scheme you are the employee of an offshore company and will pay normal PAYE tax and NIC on part of your income. The salary offered will usually be much less (hence less Tax and NI) than the amount the offshore company receives from the agency or client are paying you. So where does the rest of the money go?

In being the employee of the offshore company you are eligible to participate in the Employee Benefit Trust which makes payments to company employees, this is quite legitimate and is seen as a way of rewarding key staff. EBT payments are based on the profit the company has generated from employing you – effectively this is the difference between the amount the agency or client is paying you and the basic salary through the EBT which you are paying tax on. For legal reasons to keep the additional payments made to you through the EBT scheme free from tax they cannot be guaranteed, and this is the risk when using an EBT scheme.

The EBT route has been in use for many years during which there have been several changes in legislation attempting to block this option but many of the offshore companies that offer an Employee Benefit Trust scheme have modified their procedures to remain within the law.  It is still essential to review the legal opinion of any company offering an EBT pay scheme for contractors.  Some recruitment agencies and clients will not engage with an EBT provider.

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