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HMRC To Shut Employee Benefit Trust Amnesty

Tuesday, August 19, 2014

HM Revenue and Customs (HMRC) has confirmed that on April 1, 2015, it will withdraw a tax dispute settlement facility for businesses that used an Employee Benefit Trust (EBT) before April 6, 2011.

The EBT Settlement Opportunity (EBTSO) will now be available solely to employers that have notified HMRC of their intention to settle before March 31, 2015, and only then for agreements that are subsequently entered into before July 31, 2015. All amounts due under a settlement agreement must either be paid by that date or a signed time-to-pay agreement should be in place.

If an employer informs HMRC after March 31, 2015, that it wishes to settle, HMRC will continue to deal with appeals by way of agreement, but not on the beneficial terms of the EBTSO. HMRC said that it expects that settlements agreed after March 31, 2015, may be "substantially" higher.

Legislation introduced in 2011 made it clear that, in HMRC's view, EBTs and similar arrangements do not work. HMRC said that such arrangements are used to minimize income tax and national insurance payments on remuneration to employees and directors, and may also generate a claim for corporate tax deductions for payments into the trust.

Under the terms of the EBTSO, HMRC invited EBT users to settle their outstanding tax liabilities without recourse to litigation. Users were encouraged to discuss with HMRC how this might be achieved.

According to HMRC, the EBTSO was never intended to be open-ended. The decision to withdraw the scheme will allow HMRC to redirect resources towards the appeals of employers that did not take advantage of the EBTSO before the cut-off date. HMRC said that ending the EBTSO will force users to decide whether to settle or pursue litigation.

Commenting, Simon Wilks, tax partner at PwC, said: "The forthcoming withdrawal of the opportunity for business to settle disputes over employee benefit trusts without going to court, combined with HMRC's new rights to demand upfront payment of disputed tax, will see lots of businesses trying to settle with HMRC while there's a chance."

"Employee benefit trusts have been widely used over the years and have been supported by the courts in the past but there have always been areas of technical dispute and uncertainty. Employers will want certainty and to bring their affairs up to date rather than waiting for the outcome of the courts.

"Very significant amounts of tax could be collected over the next few months as businesses make the most of the limited opportunity to settle. There are thousands of employee benefit trusts, and many businesses, large and small, could be affected."

He added: "There has been discussion whether the Liechtenstein Disclosure Facility (LDF) could be used to settle EBT issues. However, separate changes announced [on August 14, 2014] mean that most EBT inquires will not qualify for the LDF's terms. Businesses wanting to settle these disputes will need to use the current facility which will close in March 2015. After that they will need to let the Courts decide whether they or HMRC are correct in their interpretation of the law."

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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