Employers who operate Employee Financed Retirement Benefit Schemes (EFRBS) will be receiving letters from HM Revenue and Customs (HMRC) providing an opportunity to settle any outstanding liabilities.
Based on Employee Benefits Trusts, in which trusts (usually offshore) are used to pay staff through tax-free loans, EFRBS are instead put towards employees’ pensions.
Employers have until 31 December 2013 to indicate whether they wish to take advantage of this opportunity, with any settlement being made by 30 June 2014.
HMRC is giving employers two choices for settlement:
- Option 1: Until relevant benefits are paid out by the FRRBS, no deduction will be due from corporation tax profits for payments made to the EFRBS. As at present, PAYE and NIC obligations and the inheritance tax rules will need to be considered in the future, or:
- Option 2: PAYE and National Insurance contributions (NICs) are payable on the contributions made to the EFRBS. A deduction can be made from corporation tax profits for contributions made to the EFRBS.
Employers who are unsure of their position should seek professional advice before making any decision.