HMRC Offer EFRBS Settlement Opportunity
HMRC are giving employers the chance to settle open enquiries into the use of employer-financed retirement benefit schemes (EFRBS).
The settlement opportunity applies to contributions made by employers on or after 6 April 2006 and before 6 April 2011.
HMRC are of the belief that such arrangements do not work and therefore the settlements will avoid the need to take part in potentially costly litigation, thus benefiting both sides.
Firms will have until 31 December 2013 to enter into an agreement with HMRC.
Two Options Available
They will then be required to choose one of the following two options offered by HMRC:
i) No Corporation Tax deduction can be claimed on contributions to an EFRBS until the relevant benefits are paid out by the scheme, HMRC also expect PAYE and NICs will be due when they are paid out or
ii) A Corporation Tax deduction can be claimed when contributions are made to the EFRBS. However, when those contributions are made they will be subject to PAYE and National Insurance contributions.
If an employer chooses to settle with HMRC by choosing one of these options they will have until 30 June 2014 to finalise the arrangement.
Interest & Penalties
Under option 1 interest will run from 9 months and 1 day from the end of the accounting period for which the additional amounts are due.
Under option 2 interest will run from 19 April following the end of the tax year in which allocations were made to the date the PAYE Income Tax and NIC is paid to HMRC.
HMRC have said that they will only seek penalties regarding any tax due in exceptional circumstances. However this is caveated by saying that every case will turn on its own facts.