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bigduckontax
bigduckontax, Accountant
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What is the tax charge on ebt distributions

Customer Question

what is the tax charge on ebt distributions
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.

Hello, I am Keith, one of the experts on Just Answer, and happy to help you with your question.

Some benefits eg Job Seeker's Allowance are taxable, but distributed gross. Others are not. Some are distributed under PAYE arrangements whilst others are not. It all depends on the relevant benefit. Employers ebts are not popular with HMRC who consider gross distributions of them tax avoidance

The normal deduction rate would be 20%, but dividends bear a notional 10% rate.

I do hope that I have been of some help with your question. Perhaps you could be more specific.

Customer: replied 2 years ago.

hi Keith,

1.would the EBT distribution have normal PAYE and NIC applicable.

2. how are distributions to familiy members treated?

Thanks

Expert:  bigduckontax replied 2 years ago.

1. Yes.

2. HMRC would like them similarly subject to PAYE, but the rules are not entirely clear. You should read Wither's guide here:

www.withersworldwide.com/.../is-the-employee-benefit-trust-‘ebt’-dead--2. pdf

Customer: replied 2 years ago.

hi Keith

the link does not work

Expert:  bigduckontax replied 2 years ago.

Well it would, but it is not complete. Google in 'uk tax on ebt distributions' and it should come up.

Customer: replied 2 years ago.

hi Keith,

1. can you be more specific on tax calc - is it at marginal rate of the receiving member.

2. would a family member who receives - be taxed at their marginal rate or original members rates

thanks

Expert:  bigduckontax replied 2 years ago.

1. Yes.

2. Their rate

Please note the validictory note for Withersworldwide [edited]:

'Except in very limited circumstances, the new rules signify the death of EBTs from 6 April 2011 if they are not Employees Stock Ownership Plans. Sums earmarked for employees will now be subject to income tax and NICs, preventing the deferral of taxation and therefore significantly impacting upon the attractiveness of new EBTs.'

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Expert:  bigduckontax replied 2 years ago.

Thank you for your support.

As you can see EBT's are effectively a dead duck since the 11/12 tax year. Another loophole effectively closed.

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