Last chance for EBT users to pay the taxman

A new settlement opportunity is being offered by HM Revenue & Customs as a last chance for Employee Benefit Trust providers and users to come clean before the taxman litigates.

Employers, companies and “other users” of EBTs, which were outlawed under March’s Finance Bill, can reach a financial settlement with HMRC without recourse to the courts.

This will minimise costs to both customers and the taxman, HMRC said issuing its invite, and should provide affected parties with “certainty” about their true income tax and NI liability.

Using EBTS and “similar arrangements”, this dual tax bill was minimised for its employees, while its directors were also able to claim a comparatively lower liability on corporation tax. 

HMRC said: “The Finance (No. 3) Bill 2011 published on 31 March 2011 introduced new legislation to put beyond doubt that such arrangements or schemes do not work.”

Dave Hartnett, permanent secretary of tax at HMRC pointed to the terms on which it prepared to settle, even in the minority of cases where the EBT is not linked to employment.

He said: “[This] approach to customers gives them the opportunity to discuss their cases with us and work in partnership to establish how the facts of their case fit within the proposals.”

According to HMRC,there is no deadline for the settlement opportunity which, unlike recent HMRC incentives, does not offer a lighter penalty regime and will levy interest as standard.

But if EBT users “do not respond by 31 December 2011, HMRC will assume that they are not interested in engaging with them and will look to progress enquiries formally.”

The online notice adds: “HMRC will continue to enquire into open EBT cases and may open further enquiries during this period including seeking further information.

“Where HMRC is unable to agree settlement proposals with employers or companies then they will, as appropriate, continue to progress cases within the terms of the published Litigation and Settlement Strategy, and the new legislation will apply to continuing EBTs, and funds held in them.”

 

Further reading: EBTs - Employee Benefit Trusts

 

Apr 26, 2011