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Employee benefit trust settlement opportunity

By admin
01 Aug 2014
Tax Investigation

Employee Benefit Trust settlement opportunity (EBTSO)

HMRC issued a release on 14 August 2014 to remind customers that the time to settle under the EBTSO is running out. Well it is not quite here, although the looming deadline of 31 March 2015 is just over half a year away and of course there is Christmas in between.

EBTSO is slightly problematic as an “opportunity” since the law is clearly undecided given the recent and less recent case law. It may be that HMRC is optimistic that those who used Employee Benefit Trusts (EBTs) will simply wish to deconstruct what was legally constructed arguably within the parameters of the prevailing law at that time. However, practically, there should be a real concern whether it is formidable to settle in certain circumstances rather than wait and see.

Furthermore, whilst the opportunity is labelled EBTs, the scope is much wider and will include many employer financed retirement benefit schemes, which were established (probably unknowingly to the employer) as an EBT with the ability to provide retirement benefits.

Employers who used an EBT before 6 April 2011 must notify HMRC by 31 March 2015 if they wish to take advantage of the EBTSO.

HMRC will treat an employer notifying them of a wish to settle after 31 March 2015 differently:

“HMRC will continue to settle appeals by way of agreement where appropriate but not on the beneficial terms of the EBTSO. Our expectation is that this will mean an increase in the amount on which HMRC is prepared to settle and which, in some cases, could be significant.”

According to HMRC, since April 2011, over 700 employers have taken advantage of EBTSO.

The options available to employers who established EBTs are basically:

  • Wait and see

  • Consider the opportunity
  • Register within the opportunity

The wait and see option may be appropriate where there is confidence in the current cases being heard by the courts although it may be prudent only where an employer has significant funds with which to defend or settle liabilities i.e. they can afford the outcome.

Those that are less fortunate should consider the opportunity, overall costs, possibility of a payment plan and the advantages of the opportunity.

Those resigned to accepting that HMRC may succeed may find more comfort in entering into the opportunity.

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