Companies using employee benefit trusts (EBTs) and potential beneficiaries of such trusts should seek specialist tax advice as soon as possible as HM Revenue & Customs clamps down on loopholes, writes Gerry Brown, manager of Tax and Trusts at Prudential.
HMRC is offering employers – and employees – who have used EBTs and “similar arrangements,” the opportunity to resolve any outstanding tax liabilities without recourse to litigation.
Employers, trustees or beneficiaries willing to reach a final settlement with HMRC will have to pay any unpaid tax charges as well as interest on the sum.
This is problematical, because the precise tax treatment of EBTs has not always been clear in spite of HMRC now offering to sweep up all tax issues in one go.
Sponsoring companies and beneficiaries should seek specialist tax advice as soon as possible because it could be that a company underpaid corporation tax, or an employee received a benefit that triggered a tax charge but did not report it. What HMRC would like to do is take an EBT, look at the various tax aspects and determine where there is a liability – in respect of the employing company, current and former employees. The HMRC ambition is to reach a settlement with all parties without having to resort to expensive litigation