HMRC attack on Employee Benefit Trusts

In December 2010, HM Revenue and Customs (HMRC) published new tax rules regarding the tax treatment of Employee Benefit Trusts (EBTs), Employer Financed Unapproved Retirement Benefit Schemes (ERFBS) and similar entities. These new rules, known by HMRC as “Disguised Remuneration”, are extremely complex and draconian, and are now part of tax law following Royal Assent being given in July to the Finance Act 2011.

Nigel Holmes, Director of Corporate Tax at Armstrong Watson, says, “We are aware that HMRC continues to look into such structures and the tax treatment thereof for transactions before these new rules became law. The taxman continues to look into both the tax of the companies setting up these structures and the individuals who have benefited from these; with correspondence being issued on corporation tax, PAYE/NIC and inheritance tax.”

Nigel warns, “Recipients of such letters should not just agree with what is being sought by way of tax, as prior to these new rules HMRC’s arguments are tenuous.”

Nigel advises, “Armstrong Watson has many years’ experience in dealing with the taxation implications of EBTs and can assist recipients of such correspondence to deal with their response to HMRC in order to close the enquiry or minimise the tax due. Furthermore, Armstrong Watson has some solutions on how to exit from such structures tax efficiently.”

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