Disguised remuneration and EBTs

FORTHCOMING CHANGE: As announced at Autumn Budget 2024, the government has commissioned an independent review of the loan charge. The review, announced on 23 January 2025, will ‘examine the barriers preventing those who are subject to the loan charge but have not already settled and paid their tax liabilities in full from reaching resolution with HMRC’ and will ‘recommend ways in which they can be encouraged to settle with HMRC’. The outcome of the review, with recommendations, will be reported and presented to the Exchequer Secretary to the Treasury ‘by Summer 2025’.

HMRC has always sought to ensure that the rewards gained from employment are properly subject to income tax and National Insurance contributions (NICs) deducted by employers through the pay as you earn (PAYE) system. By contrast, employers have sought to use increasingly innovative ways to structure remuneration by using employee benefit trusts (EBTs) and other vehicles to avoid, defer or reduce income tax liabilities.

The disguised remuneration (DR) rules, found at Part 7A of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) (see Practice Note: Disguised remuneration—structure

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