Umbrella companies that have been using Employee Benefit Trusts have been offered an amnesty by HMRC. This comes just months after the Revenue said it would be closing EBT schemes down.
The Finance Bill 2011 made provisions to squash the offshore tax loophole that EBTs had been exploiting. Many of the large PAYE umbrella companies restructured their organisations, and in some instances, clients were left out of pocket.
It wasn’t only umbrella companies who made use of EBTs. Other high-profile organisations, such as Rangers FC, made use of the schemes to provide tax-efficient benefits to employees.
In a recent press release, HMRC said companies would be allowed an amnesty so they can settle up outstanding National Insurance and tax liabilities without the need for litigation. This will reduce costs for both parties.
Dave Hartnett, the permanent secretary for tax at HMRC, said the Revenue will try and resolve disputes without litigating if it can be achieved within the law and without damaging the Exchequer. HMRC has adopted this proactive approach to allow customers to work with the Revenue to establish how their case fits the proposals, he added.
Employee benefit trusts, or disguised remuneration schemes, as they are sometimes known, have long been used as a way to avoid paying tax on items such as bonuses. Employees could then take out a tax-free loan from the trust. Under the new legislation, these sums will be treated just the same as if they were paid directly to an employee.
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