HMRC probes 400 EBT schemes

HM Revenue & Customs may have made up to 400 different enquiries on
employee benefit trust schemes for the tax years 1997/8 and 1998/9, it has

The schemes are at the centre of a fierce battle over tax avoidance between
the government and tax advisers, as the Revenue seeks to recover hundreds of
millions of pounds worth of tax from city bankers and small private companies.

The Revenue recently won a crucial case on the issue against telephone
company The Caudwell group.

The schemes have been commonly used for employee share schemes, but the
Revenue is worried they are being used to pay employees through circuitous
routes and avoid national insurance payments.

The number of schemes is revealed in an HMRC statement on the issue dated
20th August, and suggests that the government may be looking into a huge number
of companies over the issue, potentially running into the thousands. It has
filed ‘protective’ claims in the County Courts over the issues.

In a statement, HMRC said: ‘From existing enquiries, the Inland Revenue was
aware of approximately 400 instances of employers having paid significant
contributions to EBTs during the tax years 1997/98 and 1998/99.

‘Potentially, the monies contributed may have been used to pay remuneration
or provide benefits, but we did not have sufficient information to be satisfied
that any NIC liability due in that respect had been properly accounted for.’

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