Employers beware: New UK anti-avoidance tax laws on 'disguised remuneration' - share schemes and employee benefit trusts


New anti-avoidance legislation in the UK is in force and could result in unexpected and costly tax charges for employers and employees in relation to remuneration arrangements using employee benefit trusts (EBTs) and other intermediaries. Whilst there are a number of complex exemptions which should apply in most cases where EBTs are used in conjunction with share schemes, employers need to take much care and seek advice on the operation of their plans.


For many years, HMRC has been seeking to attack tax planning arrangements which seek to defer or avoid employment income tax or National Insurance Contributions (NICs) using intermediaries, usually EBTs. On 9 December 2010, HMRC published complex draft anti-avoidance legislation attacking "disguised remuneration".

The legislation applies to arrangements which involve an intermediary and provide an employee with a reward, recognition or loan, whether in the form of cash, shares or other assets. The legislation contains a number of charging provisions which may apply a charge to tax earlier than expected (e.g., when funds are "earmarked") even if the employee never actually receives any reward.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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