The Government body said the agreement will “level the playing field”, after it decided that many EBT users were using the LDF, which allows those with undisclosed tax liabilities to reach a settlement on predefined terms, in a way that was “not intended”.
While EBT users will no longer gain any financial advantage from settling under the LDF, they can still use the vehicle to receive immunity from prosecution and provide a bespoke service with a single point of HMRC contact.
Gary Ashford, who represents the Chartered Institute of Taxation on HMRC’s compliance reform board, said the changes mean taxpayers who reported under the rules of its Disclosure of Tax Avoidance Scheme, or any situations where HMRC have been making enquiries for more than three months, will not be able to take advantage of the LDF.
“Ultimately, this is a statement of intent by HMRC to let people know that the LDF is available but that there is a necessary tightening up of who is entitled to its provisions,” he said. “As we wait to hear from HMRC about its next steps on accelerated payment notices and follower notices, we see a new, tougher approach to avoidance.”
Partner and head of contentious at law firm Irwin Mitchell, Phil Berwick, said the changes represent “another shift of the LDF goalposts” by HMRC, adding that they will further penalise those taxpayers who do not have specialist representation.
“It is remiss of HMRC to still be making amendments to the process five years after it was introduced,” he said. “With less than two years before the LDF ends, further reviews and changes by HMRC cannot be ruled out,” he said. “Taxpayers with a disclosure to make should take specialist advice before HMRC changes the rules again.”
The body also announced that it is to close the EBT settlement initiative it opened in 2011, which has allegedly raised £800m in tax and national insurance contributions from around 700 employers who had previously used the trusts as tax avoidance vehicles.
Users who intend to settle must notify HMRC of their intentions by 31 March next year and pay all amounts due by 31 July.
HMRC director general of enforcement and compliance, Jennie Granger, said: “EBTs are avoidance vehicles and we will continue to pursue those who do not pay up.
“I would encourage all employers who have used these schemes to take this opportunity to settle under clear terms.”
The announcements come as part of a tax crackdown by HMRC, which last month saw it granted Royal Assent to direct accelerated payment notices and follower notices at users of collective investments it considers to be “avoidance schemes”.
