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HMRC internal manual

Business Income Manual

From
HM Revenue & Customs
Updated
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Specific deductions: employee benefit trusts: general-purpose EBTs: deductions for employers’ contributions: how to spot them

Deductions for EBT contributions will normally be clearly identified in the employer’s profit and loss account, or in the notes to the accounts.

However if the deduction in the profit and loss account is disguised, perhaps within the description of ‘salaries and wages’, other sources which may reveal the existence of an EBT include:

  • a deduction in the profit and loss account for legal costs incurred in setting up an EBT (capital expenditure which should be added back in the tax computation, see BIM44505),
  • a deduction in the profit and loss account for a large bonus, in respect of which employers’ NICs have not been paid and / or tax not deducted under PAYE,
  • employees’ and directors’ tax returns showing benefits received from an EBT, such as beneficial loans,
  • Employer Compliance staff identifying payments received by employees from EBTs during the course of a review,
  • HMRC Residency being notified of the existence of an offshore trust if it has UK source income,
  • a trust district being notified of the existence of a UK resident EBT,
  • Specialist PT IHT Group being notified of the existence of an EBT set up by a close company because of Inheritance Tax reporting requirements.