Legislation regarding Employee Benefit Trusts has changed with effect from the 9th December, and Employee Benefit Trusts are no longer a compliant way to achieve tax efficiency for a contractor or Ltd Company owner.
To quote HMRC:
‘Disguised Remuneration
As confirmed at the June Budget, the Government will introduce legislation to tackle arrangements involving trusts or other vehicles used to reward employees, which seek to avoid or defer the payment of income tax or National Insurance Contributions (NICs), including to provide a tax-advantaged alternative to saving beyond the annual and lifetime allowances available in a registered pension scheme.
A further announcement will be made shortly.’
This statement published in the week of the 6th December, was followed by a further announcement regarding an ‘anti-forestalling provision’ which in effect stated the intention of the inland revenue to apply the new (and as yet un-released and without parliamentary approval) legislation with effect from the 9th December. Using a neat bit of legislative time travel, the Inland Revenue has at a stroke, made the Employee Benefit Trust obsolete as a vehicle for contractors to improve their retention.