HMRC has offered employers who use employee benefit trusts (EBTs) the chance to settle upcoming tax liabilities with no further questions before the trusts become illegal.
However, a trade body has argued the rules on EBTs are still not clear enough for employers to work out if their arrangements will be liable to tax under the new law.
The latest draft of the Finance Bill, published on the 31 March, confirmed HMRC will seek income and corporation tax from EBTs, which are often set up abroad and used as pensions or to disguise large bonuses to employees in order to avoid tax.
HMRC said in November 2009 it did not view contributions to EBTs as tax free, and confirmed in April 2011 the Finance Bill will enforce charging income and corporation tax on contributions to EBTs as if they were the employees' direct income.
The Revenue has offered employers who have used EBTs the chance to come forward and settle outstanding tax without the risk of further litigation, basing the tax liability on whether or not the EBT contributions had any link to employment.
However, the Society of Trust and Estate Practitioners (STEP) warned the complex nature of EBTs means even though HMRC's offer stands until the end of 2011, companies do not have enough time to work out if their offshore arrangement will be liable.
"There are many unresolved problems with the new legislation, not least that it is some 60 pages long yet still does not provide clarity for employers who operate an EBT," said David Harvey, chief executive of STEP Worldwide.
"STEP urges such employers to seek expert professional guidance before attempting to negotiate any agreement with HMRC."
He added HMRC's action is premature given the Finance Bill will not become law for several months yet and is still subject to Parliamentary amendments.
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