EMPLOYEE benefit trusts set up to help workers across the South are the latest target for an Inland Revenue crackdown.

Many employers across this region who have set up employee benefit trusts have been receiving Inland Revenue demands for PAYE and/or National Insurance Contributions (NIC).

These letters threaten court action unless payment is received within a very short period.

Companies have been using the trusts as a tax-efficient way of providing workers with all manner of remuneration. Firms have been getting progressively more ambitious with the rewards that they have tried to push through the trusts - holidays, cars, boats.

Baker Tilly Yeovil tax partner Dianne Simpson-Price said: "The Revenue appears to be taking a deliberately hostile approach to this.

"We have examples of letters that have been sent to clients threatening a court application if payment is not made within as little as seven days.

"This appears to be part of a nationally co-ordinated campaign by the Revenue and letters are being issued without there first having been any formal notice of determination under the PAYE or NIC regulations and before negotiations for arrears have been undertaken."

Under the Limitation Act, claims for arrears of NIC generally become time barred, six years after the date when the contributions became due for payment.

"In order to avoid such debts becoming unenforceable it is sometimes necessary for the Inland Revenue to arrange for a protective writ to be served within that time limit," said Dianne Simpson-Price.

"However, the letters we have seen do not explain this. In some instances they have been written in circumstances where the alleged debt will not become time barred for many years yet.

"The Inland Revenue seems to be shooting first and asking questions afterwards."

Baker Tilly has been contacting the Revenue on behalf of clients affected to point out that it has "not raised valid notices of determination under the PAYE and NIC regulations".