TT213: Employee Benefit Trust Settlement Opportunity ending soon

Following the issue of reminder letters by HM Revenue & Customs (“HMRC”) to all companies on their “hit list” over the past two weeks, it is worth recapping on what the Employee Benefit Trust Settlement Opportunity (“EBTSO”) is.

What is the EBTSO

The EBTSO offers employers the chance to settle disputed liabilities involving Employee Benefit Trusts (“EBT”) on what are considered to be favourable terms, albeit on the basis that any loans made to employees by the EBT trustees are liable to PAYE tax and NICs.

In August 2014, HMRC issued a bulletin to announce that the EBTSO was to close on 31 March 2015.

Settlement before 31 March 2015

Employers who contributed to an EBT before 6 April 2011 must notify HMRC by 31 March 2015 if they wish to take advantage of the beneficial terms of the EBTSO to settle the resulting PAYE tax and national insurance contributions.

Agreements under the EBTSO must be entered into by 31 July 2015 with all amounts due under the EBTSO either paid by that date or with a signed time to pay arrangement in place.

Settlement after 31 March 2015

HMRC have indicated that employers can register their interest in settling after 31 March 2015 but that the terms may not be as favourable as under the EBTSO. HMRC have also indicated that if the employer does not wish to settle under the EBTSO then they will list relevant unsettled appeals for determination by the Tax Tribunal.

Is HMRC’s view of the law correct?

Probably not! The statute law was changed with effect from 9 December 2010 so that since that date, loans and other “relevant steps” made by EBTs are taxable as employment income. Prior to that date, there was no such statutory provision and the Courts have, thus far, failed to support HMRC’s views.

So why use the EBTSO?

To provide certainty and to draw a line under enquiries which can be protracted and costly and time consuming to deal with.

What to do next

We have considerable experience of settling EBT enquiries with HMRC and if you are interested in finding out more about the terms of the EBTSO and the procedure please contact your contact Partner or Layla Martin on 020 8988 6135 or at l.martin@barnesroffe.com

Talk to Barnes Roffe today
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