Employee Benefit Trusts
In July, the Supreme Court released a unanimous verdict on the Rangers football case. The decision stated any payments made through Employee Benefit Trust (EBTs) should be considered a taxable income as opposed to a loan. Consequently, the club should have deducted income tax and National Insurance Contributions from the sums paid through EBTs.
The decision makes it clear where a sum is established as being your employment earnings; you cannot avoid tax by diverting or paying them to someone else. The Supreme Court’s decision impacts on a wide range of earnings-related tax avoidance schemes including EBTs, Employer-Funded Retirement Benefit Schemes (EFRB), Contractor Loans schemes and self-employed benefit schemes, known collectively as disguised remuneration (DR) schemes.
As a result of the Supreme Court Ruling, HMRC will be inviting participants of DR schemes to register an interest in settling their tax liabilities arising from the use of these arrangements. Settling will prevent further immediate action by HMRC, as well as reducing interest charges that would otherwise be payable and to giving access to extended payment terms, where these are needed.
We will be issuing details of how to register and settle in the coming weeks. In the meantime, if you wish to contact us about settling your clients’ affairs, you can email firstname.lastname@example.org or if you are already speaking to someone in HMRC about the use of a DR scheme, or have a customer relationship manager, contact them.
Over the coming weeks, we will publish further information following the Rangers decision including the registration and settling process, settlement terms and the implications of the case.
“HMRC will always challenge contrived arrangements that try to deliver tax advantages never intended by parliament.” said David Richardson, director general of HMRC’s customer compliance group.