Pictured: Ann Bibby
Companies are being warned that their efforts to keep top
executives happy may come under threat from HMRC's recent
anti-avoidance legislation which is resulting in far wider taxing
of bonus payouts than has been the practice in the past.
And Ann Bibby, tax director at the Birmingham office of
accountants and business advisers Mazars, has warned firms to be on
their guard about schemes promising to get round the problem.
She cautioned: "Our experience so far is that the new provisions
are not well understood and businesses should be wary of investing
in structures that purport to eliminate income tax and social
security on bonuses paid after April 6 this year without a careful
analysis of the scheme in the context of these new anti-avoidance
provisions."
At issue is what is known as "disguised remuneration".
The 2011 Finance Act introduced anti-avoidance provisions
designed to target the use of Employee Benefit Trusts (EBTs) and
similar offshore trust arrangements aimed at minimising income tax
and social security payments.
"However the drafting is wide enough to adversely affect many
common remuneration structures, such as deferred bonus schemes,
that have not historically been seen as aggressive," said Ms
Bibby.
"Now, if a company arranges with an EBT, Employer Funded
Unapproved Retirement Benefit Schemes (EFURBS) or any other third
party to take steps to allocate, or earmark, cash or other assets,
including shares, for future delivery to its employees, or to
anyone connected with or nominated by an employee, there will be an
immediate income tax and National Insurance liability on the value
of the cash or assets, except in very limited circumstances."
She advised: "Companies should review any existing trust
arrangements, including deferred bonus schemes or share schemes, to
see whether these might be caught by the new disguised remuneration
provisions, and consider their impact on any future remuneration
planning strategies.
"We would be happy to meet with companies to discuss these
issues and set out our views."