Taxes Consolidation Act 1997 Schedule 12 paragraph 11A

Who may be a beneficiary of an employee share option trust (ESOT)

Paragraph 11A sets out the rules for determining who may be a beneficiary of an employee share ownership trust (ESOT) established by a relevant company, replacing the general beneficiary rules in paragraph 11.

• Where an ESOT is established by a relevant company (such as TSB Bank or ICC Bank plc), paragraph 11A applies instead of paragraph 11 to determine who qualifies as a beneficiary of the trust.
• The primary category of beneficiary is a current employee or director who was employed on the date the trust was established, has served throughout a qualifying period of up to three years, works at least 20 hours per week (if a director), and is chargeable to income tax under Schedule E.
• Former employees and directors may also qualify as beneficiaries after leaving employment, subject to conditions relating to the pledging of trust securities, a maximum period of 20 years since the trust was established, or an 18-month window after cessation of employment.
• A person who has or has had a material interest in the employing company within the preceding year is excluded from being a beneficiary, and a charity may only become a beneficiary where there are no other qualifying beneficiaries and the trust is being wound up.