HMRC to Target Offshore Trusts, Employee Benefit Trusts

HMRC has planned to clampdown on the use of ‘employee benefit trusts’ in a move which may force many into paying unpaid tax going back up to 20 years.

The move was announced in the 2016 Budget and HMRC’s focus on such offshore trusts used by employers is expected to raise more than £1bn in unpaid tax.

Employee Benefit Trusts were used by companies, contractors and employees as a way of avoiding tax and national insurance contributions. HMRC has stated that employee benefit trusts are without doubt a tax avoidance scheme.

Rather than paying the employee directly, Employee Benefit Trusts involved the employer paying into an offshore trust, which then provided remuneration to the employee in the form of a loan. It will have often been the case that some employees, such as nurses and teachers, along with IT contractors, will have received nominal wages which were topped up by loans paid from the offshore trusts.

Many employees and contractors may have been unaware as to the implications of using the tax avoidance scheme, and will have believed that their employer was acting within the law by facilitating such remuneration schemes.

As part of the Finance Bill, the rules around Employee Benefit Trusts are set to change in April 2019. As a result, HMRC will be aiming to target companies and individuals who have used such tax avoidance schemes, whether deliberately or innocently.

We assist individuals in bring their tax affairs up to date, and we have assisted a number of clients who have been involved in employee benefit trusts.

Our role is to assist in clarifying your tax affairs and in advising you through the process of making a voluntary disclosure of unpaid tax to HMRC. We can also ensure that you are then compliant going forward once your HMRC disclosure has completed.

To discuss your circumstances in complete confidence with our tax investigations and disclosures team, you can call us on 0113 387 5670, email us at enquiries@forthsonline.co.uk or fill out an Enquiry Form and we will contact you directly.