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Employees feel the benefit, taxpayers feel the pinch.
Employee benefit trusts are a variation on the loan back scheme. A person’s employer pays money into an offshore trust – often in Jersey – and that trust then loans the employee money.
The employee has to pay interest at a tiny percentage rate on the loan but never actually repays the loan. The result is that they avoid almost all tax on the income paid this way.
HM Revenue & Customs has tried to stop these schemes but some seem to survive.