Employee Benefit Trusts – an update
Back in 2011, HMRC announced the terms on which it was prepared to settle open enquiries into Employee Benefit trusts (EBT) and similar arrangements without the need for litigation. This was known as the EBT Settlement Opportunity (EBTSO). These arrangements typically sought to avoid or defer the payment of Income Tax or National Insurance Contributions and may also have generated a claim for Corporation Tax deductions for payments into the trust.
In situations where HMRC considers there is a link to employment (the majority of cases), HMRC will seek PAYE and Class 1 NIC on contributions by the employer to an EBT but will allow a corresponding Corporation Tax deduction where permitted under the appropriate Corporation Tax assessing provisions. Late payment interest will be sought on any outstanding PAYE and National Insurance Contributions.
HMRC has confirmed that since the EBTSO was launched in April 2011, over 700 employer-level users have taken advantage of its terms and settled with HMRC. However, the EBTSO was never meant to be an open-ended opportunity and will be withdrawn from 31 March 2015.
If an employer notifies HMRC after 31 March 2015 that they wish to settle, HMRC will continue to settle appeals by way of agreement where appropriate but not on the beneficial terms of the EBTSO. This could result in significantly greater amounts of tax, interest and penalties due to HMRC. In tandem, HMRC are also litigating those who do not take up the EBTSO, to ensure those cases reach the Tribunal as quickly as possible.