EBT Scheme – Employee Benefit Trusts

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With an EBT Scheme you are the employee of an offshore company and will pay normal UK P.A.Y.E. on your income from the company. The salary offered will usually be much less (hence less Tax and NI) than the amount the offshore company receives from the invoices for your services whilst contracting.  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 invoiced for your services whilst contracting and the cost of employing you (your basic salary). For legal reasons to remain free from taxation these payments from the Employee Benefit Trust cannot be guaranteed.  This is where the risk with EBT schemes is.

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.