Tax Aware

Accelerated Payment Notices: how might it impact upon you?

HMRC's intention to extend the period for investors to access relief on investment gains

Employee Benefit Trust schemes (EBTs) and Employer-Financed Retirement Benefits Schemes (EFRBs) were traditionally used by companies to pay their employees/officers in a tax-efficient manner, whereby monies were deposited in a (usually offshore) trust. The employees/officers then received payment through tax-free loans, which potentially allowed the individuals involved to postpone, or even avoid, income tax or national insurance contributions. As a result of a change in the law in 2011, EBTs and EFRBs are now caught under the 'Disguised Remuneration Rules'.

In a bid to encourage existing users of these schemes to settle their outstanding tax liabilities, the extension of the deadline to March 2017 for transitional relief on investment growth ('transitional relief') means that for those seeking to resolve their outstanding tax position, tax will only be paid on the original contributions to the schemes and not on any subsequent investment growth.

Despite the success of the EBT Settlement Opportunity (EBTSO), which closed on 31 March 2015, there are still a number of companies that have not come forward to settle their outstanding tax liabilities.  HMRC is maintaining its position that these schemes do not work and should a company/trustee not settle their tax affairs, the matter could still be litigated before the tribunal.

Gone are the days where it would be advisable to "wait and see" whether a trust structure or tax scheme will be successful in the court or tribunal. In some circumstances demands for payments of tax have already been issued and time is running out to settle. This proposed extension of transitional relief should be welcomed by those who are yet to unwind any affected EBT or EFRB arrangements.