Employer-financed retirement benefit schemes (EFRBS) and disguised remuneration

Produced by Tolley in association with

Employment Tax

Guidance

Introduction

A few years after the establishment of the EFRBS regime (see the Employer-financed retirement benefit schemes (EFRBS) ― overview guidance note), HMRC saw instances of funded EFRBS being used for the purpose of providing loans to members and so avoiding tax. The Government saw such ‘creative use of EFRBS’ as not in keeping with its intention to create a ‘more affordable’ pension tax regime.

At the same time, HMRC was looking to tackle avoidance based on the use of employee benefit trusts (EBTs) as a means of delivering loans and other benefits for employees.

In a move to close off both of these potential avoidance routes, the Government introduced (through FA 2011) a new Part 7A (ss 554A–554Z21) of ITEPA 2003. Although this is entitled ‘Employment Income Provided through Third Parties’, it is commonly referred to as the Disguised Remuneration legislation. It aims to ensure that where a third party makes provision for, what is in substance, a reward or recognition or loan in connection with

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Anton Lane

Managing Partner, Edge Tax LLP , Corporate Tax, OMB, Employment Tax, International Tax, Personal Tax, IHT Trusts and Estates

I started my career helping to sort out tax problems for high net worth individuals, corporations and high profile clients under investigation for suspected serious fraud at Ernst & Young. I specialised in anti avoidance legislation targeting offshore structures and held senior positions with large offshore fiduciary service providers. I established the Edge brand over a decade ago and in 2012 focused the main business on managing tax risks, handling suspected serious fraud cases and assisting clients and advisers with disclosures to HMRC.

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