Employee Benefit Trusts were popular vehicles for payment in the early 2000's. They were first established in the UK in the early 80's but operated in a number of tax jurisdictions including Australia, USA, Canada, Switzerland, New Zealand, etc. They have been largely driven out of existence by the HMRC who have targeted them with aggressive and in some cases retrospective legislation.
*WE DON'T RECOMMEND EBT STRUCTURES FOR UK CONTRACTORS, IT IS TOO RISKY*
EBT's were historically been aimed at rewarding high worth key members of staff - you could draw parallels with the issuing of share options. But the HMRC have argued this was taken advantage for tax avoidance purposes.
What is an EBT? An Employee Benefit Trust is established by a company through financial contributions. The trusts are generally located in Isle of Man, Jersey or Guernsey due to preferential tax and privacy laws. The company trust is usually part of a larger trust administered by a board of independent trustees. In this sense it is similar to a bank with several safes, each safe with many compartments.
The company contributes to the trust from its profits. The trustee's, or administrators of the trust, are completely separate from the business. The company may make recommendations of which employees or Directors should receive awards, but the actual decision is a discretionary choice made by the trustees. This is a crucial distinction in tax law between any distributions received from the trust and normal payments from an employer.
The discretionary funds awarded to an individual employee or director are then placed in a "Sub Trust". If we go back to the example used before this is a compartment within a safe within the bank. Sub Trusts are very flexible and there are a wide range of ways they can reward employees. These include cash distributions, loans, purchases of property, purchase of stocks and shares, investment in businesses, etc.