IHTM42953 - Employee benefit trusts: dispositions by a company: general
A charge to tax cannot arise on contributions that are made to an employee benefit trust (EBT) by a company that is not a close company (IHTM42955). This is because a chargeable transfer (IHTM04027) can only be made by an individual, IHTA does not generally apply听to a public limited company; although see (IHTM42955).听
Even so, where a company is the settlor of an EBT, the trust itself will be subject to Inheritance Tax in the normal way. The long-term UK residence听(IHTM47000)听status of the settlor (on or after 6 April 2025) or the domicile听(IHTM13000)听of the settlor听(before 6 April 2025)听will be particularly relevant.听
Long-term residence of settlor听
On or after听6 April听2025, the long-term UK residence status听of the settlor is relevant when considering whether or not听property situated outside the UK is excluded听property听(IHTM16162).听 IHTA84/S6C confirms that a company is a long-term UK听resident at all times听in a tax year if it was incorporated听in the UK or if it was chargeable to corporation tax by virtue of CTA09/S5(1) in the previous听tax year听(see IHTM47025)听and (INTM120030)听
Domicile of settlor听
For times before 6 April 2025, the domicile of the settlor was relevant when considering whether or not听property situated outside the UK is excluded property (IHTM16162). A company is treated as a 鈥榩erson鈥� and as IHTA84/S44 defines settlor as including any person who made the settlement you may need to establish听the company鈥檚 domicile. Generally, a听company is domiciled where it is registered - Gasque听v IRC [1940] 2KB 80. So, where a trust settled by an overseas company contains听only overseas assets, that property will be excluded from any Inheritance Tax charges under IHTA84/S48(3).听
The employer company may be non-UK domiciled, but听nonetheless have been resident in the UK through central management and control here, for a number of听years. The wording in IHTA84/S267 is in terms of persons, which includes companies, for the purposes of the UK deemed听domicile听(IHTM13024)听test. IHTA84/S267 applies to companies as it applies to individuals, so that a company will become deemed听domiciled for IHT purposes after it has been resident here during 17 out of the last 20 tax years.听
Identifying听the entity听听
Where the company is a multi-national with a presence in the UK, you will need to鈥�establish鈥痺hich entity is the settlor and its status. In many cases this will be clear. For example, the entity that is providing the funds may be a subsidiary that is incorporated in the UK and therefore within the scope of the long-term UK residence rule at IHTA/s6C(a).听
The long-term UK residence rule will also apply to an entity that is incorporated overseas but is centrally managed and controlled听in the UK (IHTA/s6C(b)).听
However, the rule does not apply in cases where an overseas company may be within the scope of Corporation Tax by virtue of operating through a UK permanent establishment. In such cases, and even if there is a requirement to register information with Companies House, the entity is still the overseas company.听