HMRC's Employee benefit trust settlement opportunity (EBTSO) expires on 31 March 2015. The main options for clients with EBTs, who wish to settle their position with HMRC (whether under enquiry or not), are:
- Use the favourable terms permitted under the EBTSO to settle all disputed tax and NIC liabilities. This includes no penalties; a corresponding corporation tax deduction for any amounts subjected to PAYE and NIC; a credit against any future withdrawals from the EBT; credit for benefit in kind tax paid on interest free loans from the EBT and agreement not to treat payment of IHT by the employer as earnings or a benefit in kind. The EBTSO can be used provided HMRC is notified of the intention to do so by 31 March 2015.
- Use the Lichtenstein disclosure facility (LDF) to settle all disputed tax liabilities. This option has been restricted since August 2014, when HMRC confirmed that the beneficial terms of the LDF would not be available in respect of any tax arrangements (including EBTs) disclosed under DOTAS, and/or where HMRC has commenced an enquiry. However, the LDF remains available until 5 April 2016 as a mechanism for disclosure without the beneficial terms associated with it.
- Continue to resist HMRC attempts to collect PAYE and NIC. HMRC has still not won an unequivocal tribunal or court ruling that a standard EBT trust and loan structure, properly documented and implemented, was ineffective prior to the introduction of the disguised remuneration legislation. However, HMRC is issuing accelerated payment notices (APNs) in respect of certain tax avoidance arrangements, including EBTs, meaning clients will have to pay the disputed tax whilst defending the arrangements through the courts.
Companies with an outstanding EBT dispute need to review their position very carefully before 31 March 2015. After that date, their options will be much more limited and estimated liabilities will become payable (irrespective of the final outcome) if an APN is issued - considerably negating any advantage of a 'wait and see' approach.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.