Readers’ forum: Is setting up an employee benefit fund a good idea?

One of my clients is a large family business about to celebrate 50 years of continuous operation. The family shareholders want to mark the occasion by setting up a fund for the benefit of employees past present and future. This money would be provided by the company and the fund would be administered by a committee of employees (shareholders would be excluded) and a couple of external professionals.

The idea would be that any employee could make an application on a confidential basis to the fund for support – whether it be by way of short-term loan help with funding children’s musical or sporting activities or anything else which the committee felt was a good use of the money. The company is not seeking any tax advantage from the arrangement but is concerned that the use of employee benefit trusts as tax avoidance vehicles has soured the whole...