Employers associated with Employer Financed Retirement Benefit Schemes (EFRBS) will be receiving letters from HM Revenue & Customs (HMRC) regarding an opportunity to reconcile any outstanding liabilities they may hold ascertaining to the scheme.
Traditionally used for non-domiciled employees in an account generally located offshore, EFRBS are grounded on Employee Benefit Trusts to pay staff in the form of tax-free loans. Dissimilar to purposes associated with remuneration, the loan goes towards employees’ pensions instead.
According to HMRC, ‘customers have until 31 December 2013 to consider the proposals made in the letter and to indicate whether they wish to take advantage of the options offered.’
Any businesses wishing to accept any of the given options will engage in a settlement with the HMRC that will be finalised by 30 June 2014.
HMRC is giving employers two choices for settlement:
Option 1: Until relevant benefits are paid out by the EFRBS, no subtraction is due from corporation tax (CT) profits for payments made to the EFRBS.
Option 2: PAYE and National Insurance Contributions (NIC) are payable on the contributions made to the EFRBS. A subtraction can be made from CT profits for contributions made to the EFRBS.
It is advised that any employers who encounter difficulties in this regard should consider their options before making any hasty decisions concerning their tax position.