Confidential Advice Line: 0800 063 9221

Guidance for Businesses on Employee Benefit Trusts following HMRC Supreme Court Victory


 Guidance for Businesses on Employee Benefit Trusts following HMRC Supreme Court Victory

Begbies Traynor is currently advising company directors and business owners who have historically paid into Employee Benefit Trusts (EBTs) in light of HMRC’s recent Supreme Court victory over Rangers FC.

A large number of employers across the UK have EBTs in place having been widely used over the last 20 years as a method of remunerating staff through tax-free loans rather than standard PAYE.

In the Supreme Court ruling RFC 2012 Plc (formerly Rangers Football Club Plc) v Advocate General for Scotland, five judges declared that payments via EBTs should be deemed taxable income.

In what has been commonly dubbed the ‘big tax case’, HMRC argued that around £47m paid to Rangers players, managers and directors between 2001 and 2010 in tax-free loans should have been taxed as earnings. Rangers disputed this and were encouraged by several tribunals ruling in their favour. However, the Supreme Court’s dismissal of Rangers’ latest appeal has unequivocally settled the case in HMRC’s favour and experts believe this could have a ‘profound effect’ on similar avoidance schemes.

We are handling a number of employer enquiries following HMRC’s Supreme Court victory and are aware that follower notices are now being sent out by the Revenue.

Julie Palmer, regional managing partner at Begbies Traynor, commented:

“The ruling represents a comprehensive triumph for HMRC and the ripple effect looks to be wide reaching as seemingly such payments into trusts will be treated as earnings regardless of where they were paid.

“Business owners who have paid into EBTs and haven’t yet reached a settlement with HMRC should be poised for a follower notice. The concern is that many businesses haven’t budgeted for these tax payments and the financial impact may lead to some instability.”

The saga around EBTs has rumbled on for a number of years. In 2014, HMRC’s director-general of enforcement and compliance, Jennie Granger, had warned that “time is running out” for EBT users to reach a favourable agreement with HMRC.

At the time, she said: “EBTs are avoidance vehicles and we will continue to pursue those who do not pay up. I would encourage all employers who have used these schemes to take this opportunity to settle under these clear terms. They can hold out and litigate, but they may well end up paying more tax, as well as big legal fees. They are also up against HMRC’s strong litigation record – we win around 80% of avoidance cases heard in the courts.”

Now, HMRC has secured one of its most important victories by winning its case against Rangers FC and the Revenue is on the march to recover taxation initially lost to these trusts.


About the author

Julie Palmer

Regional Managing Partner

Meet our Team of Experts

Julie is a law graduate who qualified with Price Waterhouse in 1994. Julie joined Smith & Williamson in 1997 and became a partner in 2001. With Mike Stevenson, Julie set up Middleton Partners offices in Salisbury and Southampton, both of which are now part of Begbies Traynor.

Julie is a member of the Insolvency Practitioners Association and is a Fellow of The Association of Business Recovery Professionals. Julie deals with all aspects of Corporate Recovery and turnaround work and takes all form of personal insolvency appointments.

48 Regional UK Offices

Find your local Begbies Traynor office and speak to an adviser today.

Find your Local Office
0800 063 9221

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0800 464 0871

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
0161 837 1700

Call our Confidential Advice Line. Calls to this number are free of charge.

Call us now...
Request a Meeting

We invite you to come and discuss your enquiry with us at your convenience.

Request a meeting...
Advice for businesses on EBTs after HMRC Supreme Court victory
Begbies Traynor currently advising numerous businesses
HMRC sends out follower notices to reclaim tax lost to Employee Benefit Trusts
Find out more →
 
Open Banking to Reshape the Alternative Finance Sector
CMA mandates the adoption of Open Banking by early 2018
Will see alternative lenders competing on a level playing field with dominant banks
Read more →
 
Join thousands of professionals by signing up for our updates
Analysis and Opinion from our Partners
Top Industry News
Register Now →
 

Advice you can trust

We are accredited by the following industry leading organisations

Insolvency Practitioners Association Institute of Chartered Accountants in England and Wales R3: Association of Business Recovery Professionals ICAEW Business Advice Service Turnaround Management Association ACCA (the Association of Chartered Certified Accountants) ICAS | The Institute of Chartered Accountants of Scotland

Contact the Begbies Traynor team

or Find your Nearest Office
Processing...