New rules to outlaw 'disguised remuneration'

New rules will prohibit the use of trusts to return workers set up as trust employees with delayed or zero-rate payments of income tax or National Insurance Contributions.

From April 6th, legislation will take effect to head off ‘disguised remuneration,’ typically achieved through the use of trusts and other vehicles used to “reward employees.”

It will ensure that where a third party, like a trust, makes available a reward, recognition or loan in relation to the employee’s current, former of future work, that income tax will arise.

Also according to the Treasury, the final payable amount will be deemed as a payment of employment income and the employer will be required to account for PAYE tax.

The measures, which will also tackle “tax-advantaged” alternatives to saving beyond the allowances in a registered pension schemes, will be inserted into a new part of ITEPA 2003.

They will be joined by anti-forestalling rules, aimed at taxing those sums paid, or assets provided, between December 9th, when the legislation was announced, and April 5th 2011.

However, the legislation will make room to protect specific types of arrangements involving third parties – including registered pension schemes, approved employee share schemes and ordinary commercial transactions.

Meanwhile, the government‘s plan to introduce a General Anti-Avoidance Rule (GAAR) has been criticised by the CBI, the employers’ group, citing concerns it would “introduce a very unwelcome element of uncertainty” to the tax system.

Dec 14, 2010