Historically employers used Employee Benefit Trusts (EBTs) as a tax efficient way of paying bonuses to employees. Payments were made in without accounting for tax and National Insurance (i.e PAYE) , although usually the employer did not claim a tax deduction.
These EBTs then made loans to employees with only a small amount of annual tax paid in respect of loan benefit.
HMRC have been arguing that payments into the EBTs were fully taxable. Some employers are not keen on litigation with HMRC and are therefore minded to settle.
The big question is how are the employees affected?
Employees will obviously want their employer to pay any tax and NIC now due. Employers would prefer the cash to come out of the EBT fund but don’t want to upset the employees. Employers are therefore ‘cutting deals’ with employees whereby they subsidise some of the tax hit.
The position will differ for each employee. Key points to consider are:
Forbes Dawson LLP provides employees with independent advice on the following:
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