HMRC has published answers to frequently asked questions about complex new rules to prevent employers from disguising large payments to employees through loans and trusts – employment benefit trusts (EBTs) – to avoid or defer income tax or national insurance contributions.
The 13-part Q&A, flagged by Smith & Williamson in a tax briefing, explains National Insurance contribution (NIC) rules on “disguised remuneration” legislation. The NIC rules came into force on 6 December 2011.
The guidance explains how the NIC legislation works, how earnings are measured, and how employers who have used employee benefit trusts (EBTs) and similar arrangements can resolve tax enquiries.
Draft legislation on disguised remuneration published by the government in December 2010 was criticised for being complex and too broad. Tax experts warned that the anti-avoidance law would catch many remuneration structures that were not designed to avoid tax.
Last year, the government published draft new guidance on disguised remuneration in an effort to clarify how the law will work in a number of situations including:
- Clarification that employee car ownership schemes wholly run by the employer or other companies in the same group will not be covered by the disguised remuneration arrangements
- Normal dividend payments following a share transaction will not be caught by the new rules
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