Professional advisers who may have clients being pursued by HMRC for inheritance tax liabilities in relation to such schemes are being invited to join the appeal led by Manchester firm Forbes Dawson.

Laura Hutchinson, managing partner at Forbes Dawson, said: ‘EBTs have been the subject of a longstanding legal challenge brought about by HMRC because they are viewed as avoidance schemes. 

‘Typically, they were used by companies as a way of extracting remuneration to key personnel via a contribution into an EBT, followed by a loan to the individual. The argument was that the loan was not taxable because it was potentially repayable.

‘HMRC was successful in defeating many of these schemes in the courts – most notably in the case of Glasgow Rangers – with the result that the monies were treated as employment income and taxed accordingly. Consequently, many scheme users have chosen to settle with HMRC.

‘However, HMRC has subsequently gone on to impose further inheritance tax charges in respect of the use of trusts. We have gathered those affected as a group action court appeal.’

Forbes Dawson has instructed tax barrister, Ximena Montes Manzano, of Temple Tax Chambers, to handle the appeal following her previous success in defeating HMRC in other EBT related cases.

About the appeal, Hutchinson added: ‘The case we are taking is concerned primarily with periodic charges to inheritance tax. These charges apply to the value of assets held in trust at each 10-year anniversary.’

The case also calls for exit charges, which can apply to payments made from a trust to beneficiaries when the loans are written off, to be included.

Forbes Dawson, which is representing clients with more than half a million pounds of tax at stake, is urging others affected to join the group action. 

However, Hutchinson warned that action must be taken fast.

‘If HMRC has issued a determination for the inheritance tax then an appeal must be lodged within 30 days,’ she said.

‘Advisers and clients are invited to contact us if they are involved in such a case and are interested in joining our group action, which is likely to be more cost-effective than appealing by themselves.

‘However, it is imperative the initial 30-day deadline is complied with.’

To join the group action tribunal appeal, visit Forbes Dawson

Useful links

For commentary on the use of employee benefit trusts, see In-Depth from 478-000