Rangers lose again!
The Supreme Court has rejected the appeal of Murray Holdings Ltd (RFC; Old Rangers FC) against the decision in favour of HMRC in The Court of Sessions (Scotland).
This concerned an arrangement which purportedly provided money to players and staff in the form of long term loans, as opposed to taxable income.
Contributions were made into an Employee Benefit Trust, which were then appointed into sub-trusts for the employees and their families, and then applied to provide loans to the employees, ostensibly PAYE and NIC free. The decision says that these contributions are to be treated as remuneration ‘redirected by the employee’ and therefore subject to PAYE and NIC just the same as any other remuneration. This applies even though the payments were made to a third party and not to the employees themselves (i.e. disguised remuneration).
As a result:
1. HMRC will shortly start issuing Follower Notices (FN) to collect PAYE and NIC liabilities on all open enquiry cases into EBT schemes.
2. This effectively closes the enquiry with a risk of penalties if tax and NIC are not paid within 90 days of the FN.
3. Employees will need to reclaim (set off) any tax paid on any beneficial loans although normal 4 year time limits will apply.
4. The proposed tax charge on outstanding loans as at April 2019 should now only affect those cases which are not subject to a FN based on the RFC decision.
5. If company pays the PAYE liability of the director then that payment is a benefit in kind (BIK) unless the director reimburses the company.
6. Often many companies do not have sufficient net assets to meet all of the PAYE and NIC liabilities arising on contributions they made many years ago and in some cases the employer company may no longer exist. Remember HMRC can only transfer PAYE liabilities from the employer to an individual employee (director) in limited circumstances.
7. In light of the Supreme Court decision it will be important for any company affected to seek professional advice.
If you would like to discuss your EBT or EFRBS arrangements in advance of receiving a FN and/or closure notice from HMRC please contact our Tax Partners, Steve Crompton or Chris Barrington, on the details below:
Partner – Head of Tax
direct dial: 01942 292541
mobile: 07790 840394
direct dial: 01942 292505
mobile: 07730 436070