3 December 2009
Titles that covered this article include The Daily Telegraph, 10 December 2009 and The Times, 10 December 2009.
- Likely to net Treasury tens of millions of pounds
- Anti-avoidance measures could be retrospective
HM Revenue & Customs (HMRC) has signalled that it will clampdown on tax avoidance schemes popular with banks which shield bonuses from tax, warns UHY Hacker Young. Further legislation is therefore likely in the forthcoming Pre-Budget Report (PBR) on 9 December 2009.
The schemes, known as Employee Benefit Trusts (EBTs) and Employer Funded Benefit Schemes (EFRBS), were first used by banks around 10 years ago. They are now widely used amongst all types of financial institutions and their usage has spread to other businesses across the economy.
HMRC recently announced that it believes that these schemes are ineffective. UHY Hacker Young says that tax planning boutiques do not agree with HMRC’s interpretation of the law and continue to sell these schemes.
It is believed that any move to ban these schemes would net the Treasury tens of millions of pounds in additional tax every year.
According to UHY Hacker Young, rather than mount a lengthy and costly legal challenge in the courts, the Government is likely to seize the opportunity presented by the PBR next month to introduce yet more legislation.
UHY Hacker Young points out that any anti-avoidance legislation could retrospectively tax schemes which are already in use.
Roy Maugham, Tax Partner at UHY Hacker Young, comments: “These schemes have become hugely popular, so any clampdown would yield tens of millions of additional tax. It would also be politically expedient, as the Government could present it as an attack on the excessive bonus culture in banks.”
“HMRC recently announced that it thinks these schemes are ineffective in a bid to convince employers not to use them, but the tax planning firms promoting these schemes take a different view of the law, so HMRC’s opinion has not deterred their use. Anti-avoidance measures in the Pre-Budget Report are therefore quite likely.”
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