EBTs have been in the tax press for a number of years now, in the main as a result of the Murray group Holdings case involving Glasgow Rangers FC. However, with “disguised remuneration” once again being addressed in the March 2016 Budget, together with the increased powers HMRC has in respect of enquiries I thought it would be worthwhile summarising where we are now with EBTs.
1. Enquiries – HMRC will continue to pursue these. Where the EBT was registered under the DOTAS rules then expect an Accelerated Payment Notice (APN) to pay the tax regardless of the state of play in the enquiry. Also expect the outcome of the final appeal in the Rangers case at the Supreme Court to influence proceedings.
2. Investment Growth – HMRC has extended the deadline to settle tax on funds entering into EBT structures yet take advantage of a “paragraph 59 credit” to extract such funds without a further tax charge to include any investment growth. This offer expires 31 March 2017, thereafter investment growth will not attract this relief.
3. Loans – many EBTs and family sub trusts lent funds to beneficiaries on beneficial terms. In the March Budget HMRC announced that these loans need to be repaid, or tax settled thereon, by 5 April 2019 otherwise they will become taxable then. This brief announcement raises many questions and concerns, and is of course retrospective in nature. It is believed HMRC will assess loans even where enquiries have been opened and closed. We await the consultation, with interest, promised this summer.
4. Inheritance Tax (IHT) – those who have settled or intend to settle soon based on 2 or 3 above may face an unexpected IHT charge as HMRC do not treat the ultimate exit as being relievable under the exit charge provisions. We continue to disagree with this view.
5. Anything else – even if your EBT is not caught by any of the above we would recommend a review to ensure there are no areas of risk and look at your options.
EBTs will certainly continue to be an interesting area for tax advisers over the next few years.
Author: Nigel Holmes is a Tax Partner at Armstrong Watson; specialist Accountants, Business and Financial Advisers. This article originally appeared in the Tax Journal.
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