Contractors who have used EBT (employee benefit trust)-based tax avoidance schemes could be facing Accelerated Payment Notices (APNs) from HMRC, following the taxman’s victory over Glasgow Rangers in its tax case appeal.
“As supported by the decision in this case, HMRC's view is that Employment Benefit Trust avoidance schemes do not work,” an HMRC spokesperson told BBC News. “HMRC has a responsibility to make sure people pay what they owe and will always challenge tax arrangements where we do not think they work.”
According to ContractorCalculator CEO Dave Chaplin, this latest victory and HMRC’s stance on EBTs suggests it now feels it has a free rein to take action: “Until now, the taxman has steered clear of issuing APNs for tax avoidance schemes that use EBTs.
“That’s likely to change and quickly. Contractors who have used EBTs should urgently seek advice from their scheme provider and tax adviser so they can start planning for when, not if, the APN arrives.”
HMRC has been using APNs with devastating effect since being granted new powers to fight tax avoidance in July 2014. They enable the taxman to demand tax up-front for tax avoidance schemes registered under the DOTAS scheme that it plans to challenge.
Because there is no appeal, many contractors have suffered financial ruin, losing their family homes, liquidating all their assets and broken marriages as a result of the notices, which had raised nearly £600m by July 2015.
That HMRC is likely to use this case to activate APNs for EBTs has also been suggested by AccountingWeb user James Green, who said: “HMRC now believe that the issue of APNs is appropriate for EBT planning, whereas they had held off from this before today’s decision.
“The effect of the APN is tantamount to the case losing at this stage, although I understand that it may go to the UK Supreme Court, despite a couple of half-hearted suggestions of further JRs.”