DPP Business Tax

Employment Benefit Trust

The employment benefit trust scheme solicitors at DBT & Partners are more than happy to support you throughout any investigation for disguised remuneration. So what is an EBT scheme, what laws does it break and why does this legislation relating to employment exist?

What Is An Employment Benefit Trust (EBT) Scheme?

Illegal employment benefit trust schemes (EBT schemes) are a type of disguised remuneration. Furthermore,  they are a means by which employers seek to illegally pay or reward their employees without paying income tax or National Insurance contributions.

EBT schemes may be used in place of wages, retirement benefits or bonuses.

EBT schemes are often operated by way of a third-party loan (often provided by an offshore trust) which is not taxable. There is no intention of repaying that loan. In recent years, the UK government has cracked down on these along with other tax evasion and avoidance schemes.

There are many instances of benefit schemes of this kind which are legal and above board. The difference is that the lawful examples do not use this approach to evade tax.

The body that investigates and prosecutes those involved in an illegal employment benefit trust is HMRC (Her Majesty’s Revenue and Customs).

What Are The Consequences Of Unlawful Employment Benefit Schemes?

The deadline to report your involvement in an EBT scheme to HMRC – and make a settlement plan to repay the amount of any loan owed – was September 2019.

Those who unfortunately missed the deadline may now be required to pay the “2019 loan charge” – this is a penalty equating to the sum of all monies that would be owed if the “loan” that was taken out as part of the EBT scheme had been legal.

This amount can be very large, so if you become aware that HMRC is filing a lawsuit against you about your involvement in an EBT scheme, it’s important to seek legal advice quickly.

The severity of the penalty will depend on your level of involvement, the sophistication of the tax evasion in question and the amount of tax you failed to pay.

In some cases, many recipients may not know that the scheme they were using is illegal, and so are not aware that they are liable to pay a penalty.

How Long Do I Have To Pay The 2019 Loan Charge?

In most cases, HMRC will collect together all amounts gained under an Employment Benefit Scheme and treat it as taxable income for just one year. This means you will have until the deadline for the tax year 2018-19 to repay everything.

In exceptional circumstances, you may still be able to arrange a repayment plan or settlement. The solicitors at DBT & Partners can help you to approach this.

DBT & Partners has over 30 years of experience in defending individuals and businesses accused of tax evasion and avoidance. 

We can help you to prove that you were not aware that the scheme in which you were involved was illegal. We can also assist you in collecting evidence to show that you had taken steps towards arranging a settlement before the September 2019 deadline.

Should you be charged with disguised remuneration, we can offer advice as to how you may appeal this decision and see any penalty commuted to a lesser one.

Contact us to find out how we can assist you with your EBT case.

How can DBT & Partners Help?

If you are facing an HMRC investigation into disguised remuneration of any kind, DBT & Partners can and will help you. Call our tax services team now on 0207 416 6745 for clear and proactive assistance and advice.

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