Employee Benefit Trusts (EBTs) were used a lot in the early 2000s, particularly by medium & large companies to offer benefits to their staff and at the same time mitigate tax. These EBTS were actively promoted by the Government at one time. As with so so many other similar schemes, HMRC and the Government have now closed them down as tax avoidance. Not only that, they are actively pursuing employees who got caught up in such schemes for past tax, interest and penalties.
HMRC has announced that the settlement opportunity for employers who have used EBTs to avoid tax will close on 31 March 2015 and that the favourable terms of the Liechtenstein Disclosure Facility (LDF) will no longer be available to users of EBT and other avoidance arrangements.
HMRC say that some individuals seeking to use EBTs to avoid tax have tried to use the LDF, under which individuals with undeclared offshore assets can regularise their tax affairs, to find another route to pay less tax.
HMRC’s joint declaration with the Liechtenstein government on 14 August means that users of EBT and other avoidance arrangements disclosed under the Disclosure of Tax Avoidance Schemes (DOTAS) can no longer enjoy the full favourable terms of the LDF. While these users are still able to access the limited terms (immunity from prosecution and a bespoke service with a single point of HMRC contact), HMRC say they will gain no financial advantage from settling under the LDF and that they should consider engaging in the EBT settlement opportunity while it is still available.
The settlement opportunity will only be available to employers who have notified HMRC of their intention to settle under the initiative before 31 March 2015. If an employer notifies HMRC of their intention to settle after 31 March 2015, HMRC will continue to settle appeals by way of agreement, where appropriate, but not on the beneficial terms of the EBT settlement opportunity.
HMRC say withdrawing the settlement opportunity now is one of the ways they believe that they can encourage users to reach a decision to settle.