In December last year, the UK Treasury announced that part of the Finance Bill 2011, which will come into force on 6 April, will change the current rules governing the taxation of employer financed retirement benefit schemes (EFRBS) and employee benefits trusts (EBTs).
Currently, employees can avoid paying income tax and National Insurance Contributions on assets earmarked for their use which are put into either an EBT or EFRBS.
However, although the final legislation has yet to be formerly agreed, it is understood that the Treasury will no longer allow this to happen and will make both taxes chargeable on any assets earmarked for an employee.
A note sent out by the Treasury on 9 December last year outlining the proposed legislation targeting “disguised remuneration” estimated that the Treasury could increase its annual tax receipts by up to £500m per year through the legislative amendments.
In a recent communication to advisers, RBC Wealth Management warned advisers are running out of time to ensure their clients make full use of existing legislation before the 6 April cut-off.
It said: “The new rules are extremely broad in effect. The aim before April 6 should therefore be to extract value where possible without triggering a tax charge, or to rearrange the assets in your sub-fund so that they are suitable for a long term investment strategy.”
