EBTs No Longer Effective

Unless you've had your head buried in the sand the last few days you'll have noticed that there have been some major changes in the world of EBT's. The governments commitment on eliminating avoidance as far has possible has meant that the EBT is no loger an effective way of being paid. The December 2010 changes will have a massive impact the contractor market across the whole of the UK.

What's even worse is that this announcement seems to have caught many of the EBT payroll solution providers off guard (even though it was first talked about in the April 2010 budget). There have been many stories over the last couple of days of leading EBT suppliers like Darwinpay and Sanzar Solutions letting their phones ring off when contractors have tried to contact them. It was also noted that their websites went offline on the 13th od December. Are they still paying the contractors on their books? We hope so.

In all this confusion there only seems to be one company offering a viable solution, we don't know how it works but you can find out more information on this EBT alternative by following the link.

Why Employers Like EBTs

Employee Benefit Trusts are a great way of rewarding hard working staff. The cool thing is that these benefits can come in several forms. Staff can be paid a loan, cash distributions or it’s even possible to hold shares in the employers company. If you're an employer interested in setting up an EBT for your employees then these are just some of the benefits you may think of offering:-

1. Allow employees to benefit from zero interest loans.
2. EBT's can be used as a long term, tax effective savings plan.
3. Want to pay your employees a discretionary bonus payment, an EBT is a great vehicle for this

For employers interested in setting up an EBT it is recommended that you do your research as to where the Trust should be setup. Various jurisdictions have their own advantages and disadvantages. It is widely regarded that offshore is the best place to utilise an EBT.

Top 3 Employee Benefit Trust Questions

Should I Rush Into Signing Up For An Employee Benefit Trust?

No you shouldn’t! It’s vital before changing your payroll circumstances that you perform any due diligence you need to satisfy yourself that you’re happy with any ongoing arrangements. You may choose to involve independent financial advice before committing to anything. Of course the downside is that the longer you hold off the more money you are not saving.

Can I carry On With My Umbrella Company And Take Advantage Of An EBT?

In order to take advantage of an Employee Benefit Trust you need to be an employee, this means being paid separate to your current company (be it an Umbrella Company or your own personal Limited company). There is nothing to stop you retaining any directorships that you currently have but you must be aware that any contracts will be invoiced via your new employer.

Will I Have To Pay Back My Employee Benefit Trust Loan?

All being well and if the EBT scheme you have chosen has been structured correctly then there should be no need to repay any loan. Various EBT scheme providers have their own way of dealing with this and as part of your due diligence it’s vital that your check the arrangements for when you choose to leave the Employee Benefit Trust.

Just time for one last bonus question. Should I use an Employee Benefit Trust?

No. Paying taxes are good. They help distribute the wealth from people who go out and work for a living to those who choose to not work. It’s a brilliant system and anybody using legal ways to mitigate their tax responsibilities is morally the devil in disguise.