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Government eyes EBTs and offshore schemes in tax avoidance clampdown
Posted Mar 29, 2010
December 2010: Since we published this article, HM Treasury has followed up on its pledge, and released draft clauses of the forthcoming Finance Bill 2011, which signal the end of EBT (Employment Benefit Trust) schemes as a viable option for contractors.
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Although last week's Budget contained few surprises for the contracting industry, the Government has announced its intention to introduce new legislation to clamp down on Employee Benefit Trusts (EBTs) and other 'tax efficient' schemes from April 2011.
In Press Notice 3, "Protection Tax Revenues", future action is threatened against companies who use trusts and other vehicles to reward employees (avoiding income tax and national insurance contributions in the process).
Of more immediate interest to some contractors will be the announcement of a measure "countering avoidance involving the release of loans to participators by close companies".
From Budget day itself, the Chancellor announced that close companies will be denied a corporation tax deduction for releases or write-offs of loans to participators.
'Tax efficient' employee payments harder to arrange
Commenting on the clampdown, Matt Ellis, lead partner of the employment taxes group at Deloitte, said: "The options available for employers to deliver tax-efficient remuneration to their employees could narrow considerably in the future.
"Unsurprisingly, if the tax costs for employment go up, employers are keener to find ways to mitigate them. The Chancellor clearly believes this is what is happening and today's announcement shows that it will be harder and harder for employers to implement tax efficient remuneration arrangements in the future."
Following a consultation period later this year, HMRC intends to introduce the relevant tax avoidance measures from 6th April 2011. We await the detail with interest.
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