Disguised remuneration

The Government plans to introduce measures to block arrangements involving trusts and other third party vehicles that "seek to avoid or defer the payment" of income tax and national insurance contributions. These measures will be backdated to 9 December 2010.

Among other things these new provisions will affect employee benefit trusts and Employer Financed Retirement Benefit schemes (EFRBS).  There is concern that the measures as presently drafted are too wide and will catch arrangements beyond the intended scope.  Sums contributed to employee trusts and "earmarked" for providing benefits to particular employees will now be subject to PAYE and National Insurance Contributions (NIC).

The rules will catch: 

  • loans and other assets made available to employees
  • distributions to the families of ex-employees
  • distributions to ex-employees who have moved abroad
  • unapproved employee share schemes and pension arrangements run through trusts.

Legislation will be brought in to take effect from 6 April 2011 and anti-forestalling provisions will apply to cover transactions after 9 December 2010.

Employers need to consider what to do with existing employee trust arrangements.

For advice contact your usual Littlejohn tax adviser or tax@littlejohnllp.com

 

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Year End Strategies 2010/11

Disclaimer:
This guide is prepared as a general guide only. No responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication can be accepted by the author or publisher. Always seek professional advice before acting.