Readers' forum: A novel approach

Some clients have long-standing employment benefit trust (EBT) structures for which all the funds have been loaned out to directors. HMRC enquiries are continuing and appeals have been made against determinations under Income Tax (PAYE) Regulations SI 2003/2682 reg 80 and Social Security Contributions (Transfer of Functions) Act 1999 s 8. HMRC is trying to persuade companies to settle before the loan charge applies next year.

A client has suggested that there is no benefit in settling. Instead they should just pay the loan charge. The tax would be the same as if the original contribution to the EBT were treated as earnings but it would be a current year charge. Thus there would be no interest whereas accepting the earnings point would result in many years’ worth. Although this appears attractive it does seem to mean that the introduction of the loan charge...