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A scheme using Employee Benefit Trusts (EBTs) as a means of remunerating directors and staff has been defeated by HMRC in a recent Supreme Court case.

Such schemes had been used by many employers to avoid PAYE and national insurance contributions (NICs) and involved complicated trust structures and “loans” to the employees. The Supreme Court judges have ruled in this case (Rangers Football Club) that these loans were in substance employment earnings when payments were made to the trusts and are thus ineffective in avoiding PAYE and NICs.

Whilst this was a disappointing result for users of similar strategies, it was not entirely unexpected because of the way this particular EBT was operated.

For those companies that undertook similar strategies with our providers  – Premier Strategies, EDF Tax and Root 2 Tax – discussions are ongoing with HMRC and these providers are still hopeful that a more favourable decision will be awarded to them.

If you would like to discuss any of the Rangers case and its impact on you, please call either David or myself.

For your information you should be aware that the anti-avoidance rules have also been strengthened in the latest Finance Act with the intention of blocking the use of similar schemes including the transfer of the liabilities to the employee.