HMRC's haul from EBT users seems shy of £2bn

The haul from the taxman’s clampdown on Employee Benefit Trusts appears significantly smaller than anticipated as £2bn is still outstanding, despite the Revenue claiming yesterday to be “pleased” with the yield.

In fact, HM Revenue & Customs has collected less than a quarter of the amount it believes is owed by companies that used EBTs to disguise remuneration, according to the department’s own internal estimate.

Obtained by the Times, the estimate reveals that HMRC believes about 6,500 companies used the trusts to either minimise the income tax and national insurance charge on remuneration for their employees, or to claim a lower corporation tax liability for their directors; or both.

As a result, approximately £3bn has been sheltered in EBTs and similarly structured offshore trusts but, the estimate reportedly adds, only about £650m has so far been collected by HMRC from some 500 companies.

A further £300m is projected to be collected – also through the EBT settlement opportunity (announced by the Revenue after the trusts were outlawed ) – from about 400 companies, HMRC said yesterday.

A department spokesman reflected: “HMRC is pleased with this progress to date and remain on target to recover substantial sums of tax for UK plc from these avoidance arrangements.

“Whilst we are in active discussion with 400 users, we have been in contact with all known users and continue to pursue them for the tax we believe is due.”

Despite the fact that HMRC says it has been “in contact” with all known EBT users, law firm Pinsent Masons has calculated that of the £3bn identified as outstanding, about £2bn is “not even under discussion.”

Evidencing its claim, the firm’s head of tax Jason Collins reportedly added that some 5,600 companies account for the leftover, outstanding revenue, which he said the firms appear reluctant to channel to HMRC through its settlement opportunity.

The Revenue’s latest tendency to shun reaching an agreement with tax avoiders and its EBT settlement opportunity (EBTSO) not offering a lighter penalty regime (instead it levies interest as standard), are thought to be behind the EBT users’ reticence.

The tax authority’s spokesman said: “We would have liked more people to have come forward by now, but the numbers are accelerating as the benefits of settling under the EBTSO become more widely known. 

“Clearly HMRC cannot litigate or settle all of these cases at exactly the same time so we have an ongoing programme to bring all to resolution. Our belief remains that the majority can be settled without recourse to Tribunal.”

As to its willingness to negotiate with EBT users who choose not to use the settlement opportunity, the department’s spokesman added:“HMRC continues to receive a number of approaches for settlement discussion outside of that programme and we are moving those cases to resolution, alongside our main programme of work.”

Jul 24, 2013