HMRC gets a 'big help' in its EBT crackdown

The taxman has hailed a judgement against an Employee Benefit Trust as a “big help” in his quest to close down similar, offshore schemes currently in the courts.

The EBT, used between 2000 and 2003, let Aberdeen Asset Management (AAM) pay senior employees and directors over £31m in bonuses with no income tax or national insurance.

Under the scheme, the FTSE-listed firm’s bonuses to the staff were converted into shares, thereby bypassing £7m in PAYE and NICs, which HM Revenue & Customs contested.

The EBT was outlawed in 2003, but HMRC had to take AAM  to the Scottish Court of Session, in order to recoup the tax that was avoided by the EBT’s share conversions.

HMRC’s Jim Harra, director-general of business tax, said of the department’s win: “This decision will be a big help when we come to argue other cases that are currently in the courts.

“We hope this success will encourage more companies to cut their losses and come forward to settle their EBT liabilities on the basis that this kind of avoidance scheme does not work.”

The scheme was also a waste of time and money for all parties concerned, according to David Gauke, exchequer secretary to the Treasury.

He added: “The tribunal decision sends a clear message to anyone who is tempted to use avoidance schemes: HMRC will pursue you and you’re likely to end up having to pay the tax due, interest and the promoter’s fees as well.”

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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