Readers’ forum: Co-operative trust

Our client’s business is owned by an employee ownership trust. When it was established it qualified for all the reliefs and the shareholders did not pay any capital gains tax on the sale. The company is in the process of being sold and the trustees are considering what they should do with the proceeds which includes making payments to the employees. Given that the employees are receiving the funds by reason of their employment we assume that the amounts will be subject to PAYE and National Insurance contributions.

However will the company be able to obtain a corporation tax deduction on the payments made to the trust now that the employees will be receiving funds? We assume that no inheritance tax will be payable on the basis that payments to the employee will be...