Pressure is building on taxpayers who still have outstanding loans from Employee Benefit Trust’s (EBTs).

  • Several recent court decisions all have gone against the taxpayer.
  • April 2019 sees the introduction of the new Disguised Remuneration tax charge for all EBT loans where no settlement has been agreed with HMRC.

The long running Rangers case, was decided by the Supreme Court who agreed with HMRC that loans made to employees under the club's EBT loan scheme were in fact remuneration and so subject to tax and NIC.

  • HMRC have since issued a new Spotlight 41 stating their view that the case applies to a wide range of disguised remuneration tax avoidance schemes, no matter what type of third party is used. i.e. whether routed through an EBT, EFRB or under a contractor loan scheme.
  • HMRC have providde an email address for taxpayers who wish to get out of such schemes and who do not already have a contact at HMRC.

In Oco Ltd and Another v HMRCpayments from an EBT into sub trusts were found to be earnings under the Ramsay principle; there was no possibility that the loans from the sub trusts to employees would ever be repaid.

In HMRC v Root2 Tax Ltd, the tribunal found that an employee reward scheme did meet the criteria for disclosure under DOTAS and should have been disclosed by the promoters. Whilst not specifically an EBT case, this is the first case to be heard which deals with non-disclosure under the DOTAS regulations and may be relevant to any additional planning which has been, or will be undertaken in respect of EBT’s, if no disclosure has been made under DOTAS by the scheme promoters.

We have also had had the first decisions of the GAAR Advisory Panel (GAP) which has published its first Opinion Notice, ‘Employee rewards using gold bullion. It considers the consequences of remunerating employees by means of gold bullion held in an Employee Benefit Trust.

  • The GAAR is structured in the form of a “double-reasonable test”: it only bites if the arrangements “cannot reasonably be regarded as a reasonable course of action”. 
  • Where the GAAR does apply, penalties of up to 60% of the counteracted tax can be levied over and above any penalties due under the normal rules.
  • In this case the panel found that the GAAR did apply on the basis that the provision of bullion to employees is not a reasonable course of action.

The new EBT loan charge being introduced from April 2019 will apply to all loans taken from EBT’s since 1999, meaning that even those not previously caught under the Disguised Remuneration rules brought into force in December 2010, cannot escape. The loans will be charged to income tax and NIC and the only way to avoid the charge is to repay the loans in full, or reach a settlement with HMRC. On 7 November 2017 HMRC issued details of a new settlement opportunity for users of disguised remuneration schemes including EBTs. Whilst not particularly different to the settlement options of the past few years this is the first time that HMRC have publicly provided such a clear and detailed explanation of the settlement terms available.

Given that it is now impossible to re-extract funds following a repayment of loans without triggering a tax and NIC charge under the disguised remuneration rules, the options for EBT users are now extremely limited.


RFC 2012 Plc (in liquidation) (formerly The Rangers Football Club Plc) v Advocate General for Scotland [2017] UKSC 45

Oco Ltd and Another v HMRC

HMRC v Root2 Tax Ltd [2017] TC 06115

EBT new settlement opportunity

Spotlight 41: Disguised Remuneration: a Supreme Court Decision

Disguised Remuneration 2017 settlement opportunity

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