EBTs – Where are we now?

ebt

EBTs – Where are we now?

The news that the liquidators of Rangers Oldco, BDO Stay Hayward, are seeking leave to appeal the recent decision of the Court of Session regarding Rangers’ EBT to the Supreme Court does not come as a surprise. Many commentators have questioned the reasoning behind the decision, suggesting that it flies in the face of previous decisions, not just in this case but in others that set out the entire basis of when and whether employment income becomes taxable. The judges at the Court of Session seem to have torn up a lot of legal precedent when arriving at their decision and it remains to be seen whether the Supreme Court will be prepared to permit that.

So where does this leave all of the other EBT cases that are yet to settle?

Waiting – and possibly for a while yet.

Why so?

Arguably, there were features of this particular arrangement that were unusual, if not unique – e.g. side letters being exchanged confirming what payments would be made to players, and the fact that the trustees were apparently kept in ignorance of these letters. It is doubtful that those who devised the scheme had any inkling that the parties would behave in this way.

Those features did not ultimately affect the judges’ reasoning for the decision but pending the outcome of the appeal, which could conceivably be decided by the Supreme Court on different reasoning, there will be many employers, advisers and potential beneficiaries of EBTs who will take the view that their circumstances are sufficiently distinguished from those in the Rangers case that they will not be rushing to settle with HMRC.

HMRC are off the starting blocks…

Rumour has it, however, that HMRC has not been slow in issuing PAYE determinations to the clients of the advisers who implemented the scheme – not that we are suggesting that the advisers were to blame for the defeat in the Court of Session. Whether this action will extend to other EBTs is not immediately obvious.

There is clearly still some mileage in this story. And while employee trusts are no longer generally effective as remuneration planning strategies, the statutory reliefs which apply to them may still make them useful in other contexts.

Contact us for further advice and information.

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