Advisers in 'invidious position' after Rangers EBT ruling

ADVISERS across the country are likely to find roles under scrutiny from clients following the Court of Session’s ruling last week that Rangers FC’s Employee Benefit Trust arrangement fails to work.

Last week, the court held the corporate entity that formerly housed Rangers, now in liquidation (oldco), had run a contrived EBT structure between 2001 and 2010 to pay £47.7m to players and staff in tax-free loans.

Unless the Supreme Court sees fit to overturn the ruling, EBTs face a bleak future with HM Revenue & Customs likely to pursue them with accelerated payment notices and follower notices. These notices can be issued to taxpayers using schemes that are in dispute or where a precedent has been set that would make it highly likely that they would lose at tribunal.

HMRC ran an EBT settlement scheme which closed on 31 July this year. Under the regime, businesses that used EBTs had to register their intention to settle with HMRC by 31 March 2015, in order to benefit from more favourable terms, and pay up by the end of July. There were no penalties, but now the opportunity has lapsed EBT users could face fines of 50% or more of the tax due.

But it is believed that many advisers told their clients to wait and see how the Rangers case turned out, rather than take advantage of the settlement opportunity. Today, those clients are now facing substantial bills, many times larger than those they would have paid had they used the settlement regime.

“The biggest issue is the taxpayers who haven’t settled and the absolute headache facing the profession,” MHA MacIntyre Hudson partner Alastair Kendrick told Accountancy Age.

“It’s not the accelerated payments, it’s the difference in the quantum of the settlements that’s going to be the big issue. Clients will say ‘you should have put us on notice or told us of the risk’, so I can imagine there will be numerous people in this position. The accountant’s in an invidious position and their firm will be liable.”

Indeed, Kendrick suggests the number of people affected by the ruling may be great enough to cause the taxman to reopen the settlement regime, although HMRC itself has yet to give any indication whether it will.

“There might well be [an inclination to reopen the settlement window] because it would encourage more people to come forward,” he said.