A CRACKDOWN on employers that set up offshore trusts for top earners has started to pay off, helping HM Revenue & Customs more than double its takings from investigations into big companies’ payroll tax avoidance last year.
HMRC stepped up its attack on banks and other businesses that paid salaries and bonuses through trusts, ratcheting up an extra compliance bill for the 770 companies in the large business sector by 160% to £533m in the year to April 2013, the Financial Times reports.
Companies came under pressure to dismantle structures that put money into trust for employees and members of their families, after a string of legal defeats and a change in legislation in 2011, Accountancy Age’s sister publication IFAonline.com reports.
These structures, known as employee benefit trusts, allow employees to postpone – or avoid completely – paying tax while potentially benefiting from loans or property bought with the cash.
Ray McCann, a partner at Pinsent Masons, an international law firm, said the sharp increase in revenue was a sign that the tax authority’s 15-year-long effort to tackle the structures was now bearing fruit.
“HMRC has made a concerted effort to crack down on employee benefit trusts and this has finally started to pay off after a slow start.”
HMRC said: “We will not allow the abuse of employee benefits trusts (EBT) for tax avoidance purposes. The government has made almost £1bn available to HMRC to police the tax rules and we have specialist inspectors making sure any past abuse of EBTs is effectively challenged and the tax paid.”
HMRC is continuing to ramp up the number of raids on premises it carries out as part of criminal investigations, searching 761 properties in the last year
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