Since issuing our Newsletter on HMRC’s Settlement Offer for EFRBS on 30 November, we have been helping a number of companies in exploring their options in relation to the offer. Some of the additional insights which we have gained from those cases may be worth sharing with companies which have not yet made a decision on how or whether to respond to HMRC’s offer before the 31 December deadline.
The additional insights are summarised below:
- Some companies are finding that the ‘net cost’ (i.e. after corporation tax relief) of agreeing to settle on the basis of PAYE and NICs is materially less than they had anticipated, particularly if the terms of the EFRBS trust deed avoids any additional liabilities on the trust beneficiaries under the grossing – up provisions in Part 3 of ITEPA (‘tax on tax’).
- For some companies, the opportunity to settle the PAYE / NICs now and wind up the EFRBS and the certainty that such an option provides is of more tangible value than ‘sitting tight’ and running the risk of HMRC being successful in any future litigation (which, if such litigation goes beyond the First Tier Tribunal, could still be 3 or more years away).
- For those companies which made contributions to EFRBS (either directly to sub-funds or where the funds were appointed onto a single member EFRBS scheme) prior to 6 April 2009 there is the possibility of negotiating ‘settlement terms’ with HMRC on a PAYE and NIC basis, without having to pay PAYE for years prior to 2009/10, save for cases where adequate ‘disclosure’ has not been made in the company’s Corporation Tax Return.
- For those companies which settle under the PAYE and NIC option and take the opportunity to then wind-up the trust, exposure to any IHT liabilities for the trust (under the ‘Relevant Property’ regime) can also be concluded.
Of course, notwithstanding all of the above, for many companies sitting tight and waiting for the outcome of litigation may still be the preferred option. It is absolutely critical to make the decision in each case on the basis of the specific facts and circumstances (including consideration of the directors’ plans for both the Employer Company and their wishes in relation to the future use of the funds in the EFRBS).
Please contact us now for an initial appraisal of your particular facts and circumstances to assist in making your decision on whether to register an ‘Expression of Interest’ in the Settlement Offer before 31 December 2013.