Contractors' Questions: How to recover money from an EBT?

Contractor’s Question: I had an account with an Employee Benefit Trust in the Republic of Ireland and paid into it, but received my contract from the company’s subsidiary company in North America, and other data, including my initial pay, from their other company in Europe. But I am now finding it difficult to get any repayment from any of these sources and my emails and letters are not being responded to. What action can I take to recover my money?

Expert’s Answer: This situation of engaging with an EBT provider who is based in multiple jurisdictions is common and can be troublesome in the event that you, a former user of the EBT, approach it to recover your money. In your case, the Republic of Ireland is where the EBT provider’s directors are likely to be located; your contract is with their North American subsidiary company but you were paid by their European subsidiary.

To further clarify, you’ve already paid into this EBT and now find that your provider isn’t ‘playing ball’ because recovering monies you claim are owed to you isn’t straightforward, as communications have stopped and multiple jurisdictions are involved.

To give you an idea of what you could be up against as an out-of-pocket contractor, let’s take the example of an EBT provider with a similar, multi-jurisdiction set-up that we recently pursued for a contractor wanting to recoup funds.

In that case, the company directors were linked to dozens of other companies, both live and dissolved in Ireland. Applying what we know to your situation, it is extremely likely that both the European and North American ‘companies’ you refer to are nothing more than postage boxes; with no real money or assets.

The problem you have is that your contract is with a company that exists in name only. If you take legal action in North America you may well secure a judgement, but if the company has no real assets in that jurisdiction you are unlikely to ever see the judgment satisfied. Similarly, without a contract you cannot take action against the shell company in Europe or the ultimate parent company in Ireland as you do not have a contractual relationship with these entities.

The bottom line is this: If you engage with an EBT company that uses multiple jurisdictions and complex corporate structures to help you “manage” your tax affairs, you are entirely dependent on their honesty and goodwill to receive the funds due. If the EBT provider decides to withhold payments due to you, you face expensive and complicated litigation in at least two jurisdictions to stand a chance at recovering anything at all. From a purely credit control perspective, EBT schemes generally display all of those things you don’t want in a client.

More generally, with HMRC cracking down on EBT schemes, you might in future want to avoid complicated, offshore payment structures as a means of trying to reduce your UK tax bill - they could end up costing you far more than you save.

The expert was Adam Home, of debt recovery specialist Safe Collections.

Oct 15, 2013