Within the 2010 Budget, Chancellor Alastair Darling has revealed plans to take action to tackle the avoidance of tax and national insurance contributions through the use of trusts and other vehicles to reward employees.
HM Revenue & Customs (HMRC) will launch a review and consultation during 2010 on “taxation of geared growth arrangements used in connection with employment-related securities to ensure employment income is subject to correct tax and national insurance contributions,” explained Karen Thomson, associate director of policy, research and strategic visibility at the Institute of Payroll Professionals (IPP).
Among the aims of this consultation is a strategy to prevent tax avoidance through the use of employee benefits trusts (EBTs) and employer-financed retirement benefits schemes (EFRBS).
Param Basi, technical director at AWD Chase de Vere, said: “We are not surprised that HMRC are beginning to take a closer look at any alternative arrangements established to provide remuneration/benefits for high earners. However, we are concerned that genuine employee benefit arrangements, such as employer-financed retirement benefits schemes, do not get caught up in any such review by HMRC.
“In the current climate it remains imperative that employers and high earners take professional advice to ensure that they do not fall foul of any impending HMRC clampdown.”
Following the review and consultation, new legislation will come into effect from 6 April 2011.
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