Topical tax tips: Company cars, EBTs and football, VAT and golf

In last week’s newsletter we disguised the practical tax points as articles concerning; fast cars, football and golf. More seriously, we looked at how the tax charge for using a company car for private journeys will change in the future, the implications of the HMRC win against Murray Group Holdings Ltd, and VAT repayments for golf clubs.

This is an
extract from our topical tax tips newsletter dated 12 November 2015
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

EBTs and football 
Even if you have no interest in employee benefit trusts (EBTs) or football, you will have seen the coverage of HMRC’s win against Murray Group Holdings Ltd (owners of the former Rangers FC) in the Scottish Court of Session. But what does that mean for other taxpayers? 
  
An EBT is a structure which in recent years has been used as a means to avoid PAYE and NIC on employees’ earnings. In simple terms the employer places funds in the EBT, the EBT moves those funds to sub-trusts which are ear-marked for particular employees and their families. The sub-trust makes a loan to the employee, which it has little or no expectation of ever being repaid. Thus the employee receives the funds, and if the planning worked, the employee would be taxed only on the benefit in kind of receiving an employment-related loan. 
  
HMRC always argued that the payment by the employer to the EBT was consideration for the services of the employee, and hence should be taxed as the employee’s pay. HMRC lost this argument at the First-tier and Upper Tribunals, but it succeeded with a slightly different argument at the Court of Session. If you are interested in how this happened read the blogs: EBT and Rangers FC parts 1 and 2. 
  
Lots of companies, even quite small ones, used EBT schemes in the past. HMRC will interpret the Murray Group Holdings case as evidence that none of those EBT schemes worked, even if the facts were slightly different. HMRC offered companies who had used an EBT before April 2011, an opportunity to settle the tax and NIC due with minimal penalties. That opportunity is still there, but the penalties will not be minimal as the deal will have to be negotiated individually between the company and HMRC. 
  
Where the company does not voluntarily settle with HMRC it should expect to receive a follower notice which invites the company to alter its tax returns, in this case PAYE returns. If the issue is already the subject of a tax enquiry the company should expect to receive an accelerated payment notice, which demands that the tax is paid within 90 days. 
  
For any of those outcomes the company will need expert tax investigations advice. Our experts are happy to help with that.

This is an
extract from our topical tax tips newsletter dated 12 November 2015
(5 days before we publish an extract on this blog). You can obtain future issues by registering here>>>

The
full newsletter contained links to related source material for this
story and the
other two topical, timely and commercial tax tips. We’ve been
publishing this newsletter weekly since 2007; it’s clearly written
and focused on precisely what accountants in general practice need to
know about each week.
You can obtain future issues by registering here>>>