HMRC have issued a time-limited offer to employers who offer Employee Benefit Trusts to employees in order to minimise the tax and NIC payments due on accommodation. Anyone coming forward under this scheme will have to settle in full the tax liabilities outstanding but will not face any further action through the courts or tribunals system.
Back in March, then-Chancellor Alistair Darling first raised the issue of tax and NICs avoidance through the use of trusts. Speaking at the time, Karen Thomson, associate director of policy, research and strategic visibility from the Institute of Payroll Professionals (IPP) stated that HMRC would be launching a consultation and review this year which would focus on “taxation of geared growth arrangements used in connection with employment-related securities to ensure employment income is subject to correct tax and national insurance contributions.”
HMRC have challenged the provision of accommodation through Employee Benefit Trusts and these challenges were followed up in the Finance Act 2009. Under the HMRC time limited invitation, employees and employers alike will have two months to come forward and offer to pay the outstanding tax and NICs plus interest from any lease premium scheme irrespective of whether or not an Employee Benefit Trust was used. This applies to leases for a term of up to 24 months which began or were extended prior to 22nd April 2009.
HMRC commented: “This initiative provides the opportunity for cases to be settled without recourse to the Tribunal or the Courts, minimising costs to customers and to HMRC and ensuring certainty. But HMRC remains resolved to challenge the arrangements in litigation if necessary.”
AWD Chase De Vere technical director, Param Basi commented: “We are not surprised that HMRC are beginning to take a closer look at any alternative arrangements established to provide remuneration/benefits for high earners. However, we are concerned that genuine employee employee benefit arrangements, such as employer-financed retirement benefits schemes, do not get caught up in any such review by HMRC. In the current climate it remains imperative that employers and high earners take professional advice to ensure that they do not fall foul of any impending HMRC clampdown.”