Employee benefit trusts established in the Isle of Man are used increasingly to enhance loyalty and motivation amongst staff. For example bonuses, instead of being paid direct to employees, could be paid by the employing company into an employee benefit trust and held on trust for eventual payment to employees. Contributions made by the Employers may be tax allowable. This effectively amounts to deferred compensation and in certain countries can provide tax deferral advantages to employees, not just because tax on the initial bonus is deferred but because the gross amount of the bonus can be invested tax free within the trust.
It is possible to obtain agreement from the Isle of Man tax authorities that the trust will have no liability to local income tax and as there is no Capital Gains Tax in the Isle of Man, the fund can roll-up free of local taxes.
An Employee Benefit Discretionary Trust arrangement also provides a clear advantage to the corporation as employees will have no legal rights to the bonuses until payments are made out of the trust.
An Employee Benefit Discretionary Trust can therefore be used to motivate and encourage loyalty in employees.
In addition to assisting in establishing Employee Benefit Discretionary Trusts we can also act as Trustees and provide a comprehensive administration service.
We have a sophisticated Computerised Administration System capable of dealing with plans involving large numbers of employees. The system can record contributions payable on a monthly, quarterly, half-yearly or yearly basis. It is possible to record up to 20 different fund choices and plans are in hand to increase this choice to 40. Most importantly it is possible to record each contribution made to an individual employee’s account and it’s fund growth. The system has an extensive reporting facility, which enables us to provide detailed analysis for the employees, employers and trustees.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.