As you may or may not be aware on 6th and 9th December 2010, HMRC released Ministerial Statements advising that legislation will be introduced to tackle arrangements involving trusts or other vehicles used to reward employees and that of disguised income.

They also inserted an “anti-forestalling‟ provision to apply from the 9th December 2010 meaning that any payments (loans) or assets provided between 9th December 2010 and 6th April 2011 would be caught within the new legislation as though it happened on or after 6th April 2011.

This means that contractors using Employee related trusts (EBTs) and similar schemes will from the 9th December 2010 be unable to reduce their tax liability using these models and will be forced to look for an alternative solution or switch back to PAYE Umbrella.

Anti-Avoidance: Employment Income and Pensions Contributions
The Government will be taking action to prevent efforts to avoid Tax and National Insurance Contributions (NIC) on earnings provided through the use of trusts and other vehicles.

Employers and employees are entering into arrangements using trusts and other vehicles that seek to avoid, defer or reduce liabilities to Income Tax and NICs on earnings or that seeks to avoid restrictions on pension’s tax relief. Arrangements in some cases seek to rely on the use of complex intermediary structures, some of which may be offshore. The Government is considering options for tackling these arrangements, including those which seek to avoid the restrictions on Tax Relief for pension schemes.

The Draft Legislation
“The legislation inserts a new Part 7A into ITEPA 2003. The legislation ensures that where a third party makes provision for what is in substance a reward or recognition, or a loan, in connection with the employee‟s current, former, or future employment, an income tax charge arises.”

Now the good news……
There are still some products that remain fully compliant with Government rulings. That do not operate Employee related schemes. That uses statutory reliefs, involves no “tax avoidance‟, can be fully disclosed to HMRC, have never been challenged by HMRC in court, and loans are not taxable as “disguised income”.

APS Group is the example of such a product that I have been personally using. They use a product that has been around for nearly 20 years and is fully transparent to HMRC.

A large part of the fee I pay each month goes directly to Legal Council each month to make sure that we always comply with new laws or legislation.

The APS product is an “Intellectual interpretation of the existing statutory provisions and Fiduciary law”. APS Limited is the first company I have seen using this better structure and I have started to use them for myself. If you are interested in doing so too click http://www.contractbusinessanalyst.com/referral or call 0844 5675657 and quote the reference “Contract Business Analyst.com”