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Spotlights: Employee benefit trusts

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People who have used EBTs to avoid tax on employment income are being offered ‘products’ designed to shelter funds in current schemes from the effect of planned legislation to counter avoidance of income tax and NICs, according to HMRC.

‘These arrangements rely on the availability of credit for loan repayments made before 6 April 2012,’ HMRC said in a new tax avoidance ‘Spotlights’ item.

They added: ‘In HMRC's view while these convoluted arrangements seek to weave a way through the legal changes they do not succeed. Even if they did HMRC would still challenge them as delivering remuneration which should have been subject to PAYE from first principles. Subject to parliamentary approval, the new legislation will be effective from 6 April 2011 and some aspects of the proposed new law will apply from 9 December 2010.

‘Individuals considering entering into such income tax avoidance arrangements should be aware that HMRC will pursue people who seek to avoid tax on monies they earn, through the courts where necessary.’