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‘All or most� test

IHTA84/S86(3)(a) requires that an employee benefit trust is open to ‘all or most� of the employees of the company or body concerned (IHTM42915).

TA88/Sch9 contained reliefs from Income Tax and Capital Gains Tax for approved profit sharing schemes. »Ê¹ÚÌåÓýapp provisions for approval allowed membership of an approved scheme to be restricted to full time employees with 5 years service. In this way, it was possible for a profit sharing scheme to be approved even though less than the majority of all the company’s employees were able to join. This would be particularly relevant in the case of a new company. To remove any doubt as to whether or not approved profit sharing schemes met the ‘all or mostâ€� test, IHTA84/S86(3)(b) was added by FA82. As a result these approved schemes automatically satisfy IHTA84/S86.

Close company profit sharing scheme

IHTA84/S13(2) restricts the exemption in IHTA84/S13(1) for dispositions made by a close company (IHTM42960).

However, in determining whether that restriction applies, you should ignore any power in the trust to appoint shares to participators under a profit sharing scheme approved under TA88/Sch9 in view of IHTA84/S13(4)(b). So, if such a power exists, it does not restrict the exemption given by IHTA84/S13(1).

Appropriation of shares

Usually, an appropriation of shares under an approved profit sharing scheme means that the shares cease to be settled property. Where that appropriation was to a participator, a charge would normally arise in view of IHTA84/S72(3)(b). But where the trusts are an approved profit sharing scheme, IHTA84/S72(4) prevents a charge from arising.