FAQs issued February 2011

Finance Bill 2011, issued on 31 March 2011, contains a new Part 7A to be inserted in the Income Tax (Earnings and Pensions) Act 2003 (ITEPA)  

HMRC has issued FAQs in relation to provisions of the Finance Bill 2011 concerning disguised remuneration. Points to note include:

  • Confirmation that Part 7A will apply to EFRBS (employer-financed retirement benefit schemes) and that the draft exemption in section 554E(1)(g) (to be inserted in ITEPA) does not cover genuine EFRBS.
  • The disguised remuneration provisions in Part 7A will not create tax charges for wholly unfunded unapproved retirement benefit schemes.
  • Promises by an employer of future payments through a relevant third person, backed by assets held by the employer, will be subject to Part 7A.
  • An unfunded unapproved retirement benefit promise recorded as a balance sheet liability of the employer; or secured by a letter of credit from a bank secured by a floating charge over all the employer's assets, would probably not amount to earmarking for the purposes of the disguised remuneration provisions. However, a definitive answer would depend on the facts of the case.
  • The Finance Bill has been amended so that transfers between corresponding overseas schemes will be exempt from a charge under Part 7A to the extent that the transfer value is referable to contributions before 6 April 2006.
  • Part 7A will be amended so that pension payments will be subject to tax under Part 9 of ITEPA as pension income in priority over Part 7A.