July 2018
By John Clifford, managing director at Central Bridging Loans
As we move through the summer months, HMRC is gradually increasing pressure on taxpayers who still have outstanding loans from Employee Benefit Trust schemes (EBT). A series of recent court decisions, most notably the long-running and high profile Rangers case, have all gone against the taxpayer. Indeed, the Rangers case was ultimately decided by the Supreme Court, which agreed with HMRC that loans made to employees under the club’s EBT scheme were in fact remuneration and so subject to tax and NIC.
Following the Rangers decision, HMRC, whose collection powers were considerably enhanced with the introduction of the accelerated payment notice (APN) and partner payment notice (PPN) legislations, has started to issue follower notices to companies which set up EBTs and have not yet settled them.
While many tax professionals continue to argue that the Rangers decision was case-specific, this hasn’t stopped HMRC issuing follower notices to other taxpayers using the same ‘scheme’. If taxpayers don’t comply with these follower notices and they subsequently lose their case, HMRC will be able to apply a penalty of 50% of the tax found to be payable.
In addition to this, HMRC has further tightened the law around these discretionary trusts, ensuring that those who have indicated a willingness to settle have until September to provide detail. After this deadline, April 2019 then sees the introduction of the new disguised remuneration tax charge for all EBT loans where no settlement has been agreed with HMRC.
The clock is most definitely ticking, with a large number of companies facing a very serious tax bill on 5th April 2019 and having very limited means to mitigate this.
In view of this developing and serious situation, the team at Central has spent the last six months pulling together a crack legal and consultancy team, including former senior HMRC personnel, with whom we aim to assist as many people as we possibly can.
We already have considerable and longstanding experience dealing with HMRC on behalf of clients and have regularly advanced loans to resolve APN issues – most recently a £1.1m second charge loan where consent was not forthcoming from the first charge holders.
The client was a successful businessman who had chosen not to contest an APN he had been issued with. When we first spoke to the client he had less than two weeks of his 90-day notice period remaining, leaving him facing an immediate fine if he didn’t make payment by the deadline as well as further enforcement action.
We agreed a loan against an investment property at 52% LTV and completed at 1.25% per month with a term of 12 months, allowing the client ample time to sell the security property at maximum value. Crucially, we agreed and funded the loan within seven working days of being approached, including arranging a full valuation and full legal advice for the client. With the client’s authority, our team liaised directly with HMRC, making full payment of his APN liabilities in advance of their deadline, ensuring no penalty interest was incurred.
Going forward the team at Central will continue to monitor all HMRC announcements so that we can provide the most up to date information and advice. Our goal is to empower clients to make the most informed decision on how to proceed and then to assist and support them, whatever that decision is.
The tax man may well cometh, but at Central we stand ready to assist clients with a range of solutions – to ultimately make him go away again.