Employee benefits experts raised concerns this week that Finance Bill clauses targeting disguised remuneration for high rate taxpayers may affect non-abusive benefits schemes.
Published in the wake of taxpayer protests last week, a written ministerial statement from Treasury exchequer secretary David Gauke indicated that the government plans to block arrangements involving trusts and other third party vehicles that “seek to avoid or defer the payment” of income tax and NICs.
A new Part 7A will be introduced into the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). Where a third party makes provision for a reward or loan for an employee, the new law will establish that an income tax charge will be raised on the money made available or the market value of the asset used to deliver the reward.
According to Gauke, the new law is necessary to prevent higher earners who have used up their annual and lifetime pension allowances to set up “tax-advantaged” alternative schemes. Other scenarios that have caught are things like loans offered through Employment Benefit Trusts that the employee never pays back.
The amendments to ITEPA 2003 will ensure that registered pension schemes, approved employee share schemes and ordinary commercial transactions will be able to continue and benefits packages available to all employees will be unaffected, he added.
But Philip Fisher, PKF employment benefits and remuneration partner warned that the widely drawn clauses may catch arrangements they were not intended to.
“This is the most complex legislation I have seen in my life. It’s absolutely unintelligible,” he said. “It may take years to truly understand.”
Fisher found it telling there was no parallel legislation to cover National Insurance Contributions. “Why not do them together? This suggests the government is trying to do something in too much of a hurry.”