The subject of the efficacy of using Employee Benefit Trusts (EBTs) as vehicles for tax planning/avoidance has been highlighted by the Supreme Court decision in the case involving Rangers FC.

In addition, the Disguised Remuneration legislation was introduced to counteract such structures and in particular to prevent loans being made by third parties (with extended repayment terms) being made without tax and NICs on the principal amount of the loan.

HMRC continue to scrutinise planning in this area, including structures designed to avoid the impact of disguised remuneration. Consistently with this, a new Spotlight (the HMRC series of short commentaries on tax planning/avoidance structures which they believe are ineffective) was issued on 10th August. This Spotlight 39 commented adversely on planning seeking to characterise arrangements which in substance involve a loan as falling outside the disguised remuneration loan provisions as holding the money in a fiduciary capacity. The Spotlight makes the point, consistently with recent case law, that simply describing an arrangement as being other than what it is (in this case a loan) will not alter the tax analysis which in this case means treating the payment of money as a loan within disguised remuneration.

This is unlikely to have relevance to most employee share schemes but demonstrates the need for care with disguised remuneration and the dangers of seeking to enter into artificial arrangements to avoid the intended purpose of tax legislation, particularly anti-avoidance provisions.

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