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HMRC settlements on EBTs

HMRC Settlements on EBTs are back on the table

Richard Coombs reminds advisors to encourage clients to settle their historic EBT liabilities before April 2019 . 

Employee Benefit Trusts seem to be permanently in the news these days and the recent “Paradise Papers” leak has brought them to the fore yet again.  This article is not about that leak but will be of more practical interest to anyone who has clients involved in historic EBTs. 

As you may be aware, in April 2019 any outstanding loans from an EBT will become immediately taxable and subject to PAYE & NIC.  The legislation is currently being enacted and therefore it will become law.  HMRC have therefore been encouraging clients to settle their historic EBT tax liabilities before this new legislation bites.  However, some weeks back HMRC suddenly announced that they were temporarily suspending any further settlement discussions.  Our view was that this was to give them time to digest the impact of the recent well publicised decision in the Rangers EBT case. 

They have now just published detailed guidance on EBT settlement terms and so it appears that they are willing to talk again.  From a practical perspective, it is pretty much “as you were” – they appear to have simply set out in a more formal way what they were willing to accept before the hiatus.  Essentially, if the client is willing to pay the tax, NI and interest on the original planning then HMRC will allow them to wind the whole thing up without any additional charges.  Whilst this may not sound like much of a “deal”, HMRC pretty much now hold all the cards on EBTs and therefore the opportunity to wind up existing EBTs should not be overlooked.  There are, however, some concessions for certain types of EBTs and therefore it is vital that your clients take some advice now to ensure that they can benefit from the best settlement terms.  

We understand that many clients do not want to spend good money after bad in trying to sort out their EBTs and a number are burying their heads in the sand, hoping the problem will go away.  Unfortunately it will not and HMRC will now be stepping up their activity to ensure that, come 2019, the tax is collected one way or the other. 

We are always happy to have a conversation with EBT clients about their individual positions and do not charge for this and so we would encourage them to pick up the phone just so they can understand what their options are.   

If you would like to discuss EBT settlement options with Richard, please do contact him at richardc@batesweston.co.uk.

As always, you are reminded that this article is generic in nature and you should take no action based upon it without consulting your professional advisor.