‘Disguised remuneration’ legislation
Introduced from April 2011, though ‘anti-forestalling rules’ were also introduced to catch similar payments made on or after 9 December 2010.
What is the measure aimed at?
Companies (large or small) who pay money to third parties, e.g. via Employee Benefit Trusts (EBTs) or unregistered pension schemes, as an alternative to paying income to employees or directors. The EBT etc will then often put money at the employee’s or their family’s disposal, perhaps by making a loan.
How does it operate?
Identifies whether funds have been placed at the employee’s disposal or have been ‘earmarked’ for them (or for their family). EBT arrangements would normally involve someone else (a 3rd party) making or earmarking the payment to the employee or their family.
What is the result?
The paying business must account for PAYE/NIC on the payment, as soon as money is placed at the employee’s disposal or earmarked for them.
Is there potential for duties to be transferred elsewhere?
Normally the business paying into the EBT etc will be the employer, who will be liable. Existence of a 3rd party (e.g. involved in making or earmarking the payment) would not alter the tax/NIC obligation which would remain with the employer.