Loans from EBT – recent HMRC developments on disguised remuneration schemes
Disguised remuneration schemes include tax avoidance arrangements that seek to avoid Income Tax and National Insurance contributions (NICs) by paying scheme users their income in the form of loans. Typically, the loans will have come from a “third party” such as an Employee Benefit Trust (“EBT”). In the view of HMRC, the loans were never intended to be repaid and so they are no different to normal income and are taxable.
These plans became popular in the mid-2000s but have been the subject of HMRC review for a number of years – with settlement terms being issued in November 2017.
As part of the continued developments in respect of those who have not settled with HMRC a “charge” on any outstanding loans was introduced as from 5 April 2019. This applies to all loans made since 6 April 1999.
Importantly, the loans are effectively deemed to be taxable income and will be subject to income tax and NICs.
Whilst it is likely that any organisation which has made these loans, now or historically, is already dealing with them, anyone who is unsure whether the loans connected to their EBT will be liable for the charge should ensure that it is compliant with the regulations.
For further information or to discuss any questions you may have, contact Stuart James.