The following Owner-Managed Businesses guidance note by Tolley in association with Karen Cooper of CooperCavendish LLP provides comprehensive and up to date tax information covering:
HMRC has, for many years, sought to ensure that the rewards gained from employment are properly subject to income tax and National Insurance contributions (NICs) deducted by employers through the Pay As You Earn (PAYE) system. By contrast, employers have sought to use increasingly innovative ways to structure remuneration by using employee benefit trusts (EBT) and other vehicles to avoid, defer or reduce income tax liabilities.
The ‘disguised remuneration rules’ cover the provision of loans and other forms of benefits by third parties, as well as certain arrangements which provide pension benefits in excess of the annual and lifetime allowances applicable to registered pension schemes.
There are exclusions for certain types of deferred remuneration arrangements, HMRC approved pensions, share plans and certain employee benefits.
The final legislation is contained in ITEPA 2003, Part 7A. Guidance on ITEPA 2003, Part 7A is contained in the Employment Income Manual starting at EIM45000. In addition, HMRC has published draft manual updates for changes included in FA 2017 and F(No 2)A 2017.
The legislation applies where:
The definition of ‘arrangement’ is extremely wide and covers an agreement, scheme, settlement, transaction, trust or understanding. Informal arrangements which are not legally binding are also caught.
When the legislation applies, which HMRC refers to as passing through the ‘gateway’, the value of the cash or assets which are the subject of the ‘relevant step’ is treated as employment
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