Posted by James Pearson on 26 Mar 2015
Employee Benefit Trusts (EBTs) were often used by companies seeking to reward employees without operating PAYE (Pay As You Earn)/National Insurance contributions by making payments through trusts and other intermediaries that favour the employees or their families. The arrangements usually sought to secure a Corporation Tax deduction, as if the amounts were earnings at the time they are allocated, and also defer PAYE and National Insurance contributions or avoid them altogether.
HMRC’s view is that at the time the funds are allocated to the employee or his/her beneficiaries, those funds become earnings on which PAYE and National Insurance contributions are due and should be accounted for by the employer.
The EBT Settlement Opportunity (EBTSO) allows participating companies to pay the PAYE and NICs due on remuneration via EBTs, or claim a credit for such a charge to PAYE and NICs arising on amounts due to the disguised remuneration rules (Part 7A ITEPA 2003), with minimal penalties an interest charged.
The EBTSO will only be available to employers who have notified HMRC of their intention to settle under the EBTSO before 31 March 2015 and then only for agreements that are subsequently entered into before 31 July 2015 with all amounts due under the settlement agreement either paid, or with a signed time to pay agreement in place, by that date.
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. HMRC’s expectation is that this will mean an increase in the amount on which HMRC is prepared to settle and which, in some cases, could be significant.
Our experience in negotiating with HMRC has resulted in some favourable settlements which have allowed the clients to access funds that could otherwise have been locked in to the EBT.
Care is needed in analysing the best course of action and how to represent the case to HMRC. We have the skills and experience to advise on the best courses of action so, if you are considering whether to use the EBTSO, contact us without delay to make sure the best result is achieved.
If you would like any advice regarding the above article or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or firstname.lastname@example.org
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