HMRC to target anti-avoidance trusts

Posted by admin at 15:51 on 13 Feb 2017

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News this week from the Lib Dem Conference that 900 million is to be made available to HMRC to tighten up controls on anti-avoidance has created somewhat unnecessary mixed messages regarding the future of Employee Benefit Trusts (EBTs).

Rob Crossland, Chief Executive of Umbrella company and business service provider Parasol said: there are some contractors out there who currently rely on EBTs to maximise their take home pay who should now be feeling extremely nervous. Therein lies the crucial distinction that needs to be made: the difference between questionable tax-avoidance EBTs and the correct use of a discretionary trust for the benefit of employees.

For several years trusts created under the header of EBTs have been eliciting raised eyebrows amongst the folk at HM Revenue & Customs and often for good reason. Frequently trusts are abused in order to avoid taxation by allowing beneficiaries to receive a hefty loan promptly after having set up the trust, with little intention of it ever being paid back. It seems therefore only right that these agreements should come under scrutiny by HM Revenue & Customs, as acknowledged by John Whiting head of the CIOT (Chartered Institute of Taxation) who has stated that all right minded tax advisers will welcome this increased emphasis on tackling tax evasion.

However, HMRC should have no concerns about correctly implemented, correctly administered and correctly intended EBTs. These are still crucial for many Companies looking to provide for their employees be it through the creation of an internal market for the purchase and sale of private company shares, or simply as a separate legal entity to own assets on behalf of the Beneficiaries. In these circumstances EBTs are a valuable tool for a Company, especially when used alongside an employee share scheme, in providing just what the name implies: - benefits to employees.

For anyone who is unsure as to the status of an existing EBT or, who would like further information on the implementation of an EBT for genuine employee benefits, feel free to contact any of our advisers on 020 8949 5522.