PBR: Gordon kills EBT schemes

Following on from the UKTECH stories relating to Dignatio/CFP, the saga of EBT schemes took another twist in the Pre Budget Report when the Chancellor announced immediate measures to counter the avoidance of tax and national insurance contributions through the abuse of Employee Benefit Trusts.

There has been a significant growth in the use of these schemes since the introduction of IR35. As a contractor wrote in a response to a UKTECH story, describing a scheme he had joined: It was fantastic, No income tax, no VAT, lots of money back, and it has a guarantee in the contract that there be no extra tax to pay. They have insurance to back that guarantee.

It would appear that the tax loophole that allowed these schemes to flourish in the post-IR35 era has now been closed.

Andrew Jones from tax experts WJBChilterns, talking exclusively to UKTECH, said: These fundamental changes, set out in the Pre Budget Report, should be effective in stamping out the perceived abuses which the Inland Revenue has been challenging for a number of years. Effectively this should eliminate the myriad tax and NI deferral structures as most companies will not be prepared to wait for any substantial period of time to secure the tax deductions which would only be achieved when beneficiaries are in receipt of qualifying taxable and "NIC’able" benefits.

"These "qualifying benefits" specifically exclude loans which are a cornerstone of many current arrangements"

The measures come into effect immediately. Additional regulations relating to NIC will be brought into effect tomorrow (November 28).

For freelancers who have purchased the Freelancer's Guide to Business Setup, Options & Risk a detailed analysis of these changes will be added as an appendix and provided free of charge.

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Andy White