Employee benefit trusts and inheritance tax

HMRC have issued Brief 49/09, detailing the Revenue's current view on the incidence of inheritance tax on contributions to EBTs.   It is difficult to divine what message this is intended to convey, or what objective the Revenue are now seeking to achieve, when the current view remains the same as that which has been expressed by the Revenue since 2005, in both their post Dextra press release and in correspondence with individual taxpayer companies. 

It is stated that the Revenue intend to pursue existing cases (of which there must be thousands, if not tens of thousands) on the basis of the views they express but yet the Revenue has shown little enthusiasm to pursue such cases to date, and even less enthusiasm to litigate. 

In cases of which I have been involved first hand, the Revenue, when challenged, and particularly in relation to their over-confident dismissal of IHTA 1984, s.12, have seemed more than ready to slink back into the shadows with little more than an indication that it was a worth a try-on their part.

With the charge on particpators in close companies, under IHTA, s.94, excluded from being a potentially exempt transfer, and with so many of the ill-sold and ill-conceived EBTs being sponsored by close companies, there must be a considerable amount of hard cash awaiting collection by HMRC if they can make their case. But can they ? 

With the Revenue having been far from confident of their ground to date, one has to wonder whether the Revenue are now going to change tack.  If so, will it be a case of the Revenue looking to bully shareholders in close companies to settle for fear that those who don't  acquiese could find themselves lumbered with the costs of having to fight a test case ?