HMRC has won in the Supreme Court against Glasgow Rangers and its use of Employee Benefit Trusts (‘EBTs’). Rangers had been using an EBT to channel approximately £50m of payments to employees since 2001. HMRC claim that the amounts received as “loans” is actually subject to tax and forms part of the employee’s income.
All companies that have used EBTs to pay staff are urged to come forward after the Supreme Court’s decision which supported HMRC’s view that all loans given under a similar arrangement is liable to income tax and NIC.
You can find the judgement here.
According to Karen Weston at Aspire Business Partnership, “In this case, HMRC were successful and the Supreme Court ruled in their favour. HMRC seem to be cracking down on these kinds of schemes and there is still talk around the introduction of the April 2019 loan charge.
Government inserted Schedule 17 into the draft Finance Bill 2017 which stated that all loans or debts from a disguised remuneration scheme will be taxed as earnings if they haven’t already been fully taxed or repaid on or before 5th April 2019. However, the draft Finance Bill was amended at the eleventh hour and clauses were removed, including Schedule 17. However, this could be reintroduced at any point.”
TJW Contract Solutions’ Managing Director, Tracey Williams said “this has been an important case as far as we were concerned as, although we have never used them to pay our contractors, we are aware of some providers that are continuing to use EBTs to pay their contractors. With the new rules on Failure to Prevent Tax Avoidance coming into force at the end of September, it is more important than ever that all companies in the supply chain take immediate steps to ensure that everyone is abiding by the rules.”