Family businesses targeted in tax avoidance clampdown
FAMILY businesses are being targeted in a £7bn Government tax avoidance clampdown, a Birmingham accountant has warned.
Phil Waller, tax partner in the Birmingham office of Mazars, also said the moves could effectively abolish disguised remuneration schemes such as employment benefit trusts (EBTs) and employer funded retirement benefit schemes (EFURBs)
“The rate of tax on such schemes is perhaps 1 or 2% against 40-50% – what will be really interesting is whether they seek to do this retrospectively.
“They might try but they will find it difficult to make stick. However, there are huge amounts of money involved,” he said.
The Government is bringing in legislation ‘to tackle arrangements involving trusts or other vehicles used to reward employees, which seek to avoid or defer the payment of income tax or National Insurance Contributions (NICs), including to provide a tax-advantaged alternative to saving beyond the annual and lifetime allowances available in a registered pension scheme’.
Mr Waller said: “Basically it could be the end of EBTs and EFURBs and far as significant tax planning is concerned.”
Such trusts are set up to extract profits as efficiently as possible from family firms. They are based on the principle of on-going loans.
Additional steps are being taken by the Government to prevent groups of companies using intra-group loans or derivatives to reduce the group’s tax bill, and addressing schemes where a company does not fully recognise certain amounts in its accounts involving loans and derivatives.
Other imminent measures include stopping investment companies retrospectively changing the currency they prepare their accounts in for tax purposes, and, tackling businesses who artificially split the supply of services to reduce VAT.
The Government is also to investigate the possibility of introducing a General Anti Avoidance Rule. This would be a catch-all law aimed at removing the need for anti-avoidance legislation every time some new tax scheme is dreamed up.
