The Pensioneer Trustee Company (Guernsey) Limited

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HMRC updates guidance on employee benefit trust settlements

September 6, 2016

Following the closure of the HMRC settlement period for for employee benefit trust settlement opportunity (EBTSO) last year, the tax authority has set out revised guidance outlining how income tax will be offset for non-disclosed years

Taxpayers can still settle their affairs, but since the EBTSO was withdrawn on 31 July 2015, the treatment of any agreement will be different.

EBTSO only applied to users of employment benefit trusts (EBT) before the introduction of the rules at part 7A Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), but it is still possible to enter into an agreement that meets the conditions of paragraph 59 of schedule 2 of Finance Act 2011.

The guidance sets out the general principles that will apply to settlements and provides a table showing a comparison of the terms of settlement both before, and after, the withdrawal of the EBTSO.

Under EBTSO, income tax and class 1A National Insurance contributions (NICs) paid on beneficial loans from the EBT could be offset against the total liability even if the income tax and NICs paid on the beneficial loans were out of date for an overpayment relief claim.

In contrast, income tax will now only be offset for years which are open, or for which a valid overpayment relief claim can be made. The class 1A NICs can only be offset if it is possible to make a valid application for return of contributions paid in error.

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The Pensioneer Trustee Company (Guernsey) Limited is licensed by the Guernsey Financial Services Commission under The Regulation of Fiduciaries, Administration Businesses and Company Directors, etc. (Bailiwick of Guernsey) Law, 2000 and subject to The Pension Licensees (Conduct of Business) & Domestic and International Pension Scheme and Gratuity Scheme Rules (No.2) 2017.