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Self-Employed To Suffer UK Tax Hit

Tuesday, December 14, 2010

Punitive tax changes proposed in the UK’s draft Finance Bill will hit UK entrepreneurs and the self-employed the hardest, Ernst and Young has warned.

Analyzing the impact of proposals in the draft Finance Bill, set for publication on March 31, 2011, Giles Capon, partner in Ernst and Young’s Human Capital team, on December 9, stated:

“New legislation [proposed] in the draft Finance Bill will have major implications for the pensions provision of many individuals, including higher paid employees, entrepreneurs and the self-employed, whose ability to make tax-efficient contributions to their pension pot will be slashed from GBP255,000 per annum to GBP50,000.”

“These individuals have previously been encouraged to 'top up' their pensions via other means. However further measures announced today will discourage many employer-financed top up arrangements. A level of GBP50,000 per annum may be sponsored by the employer across the board, but anyone who wishes to make additional retirement savings will have to make private arrangements out of net pay.”

Also, Capon said, as part of these measures the government has launched a consultation on draft legislation on Employee Benefit Trusts, with the aim of clamping down on what they refer to as 'disguised remuneration'.

Capon continued: “HMRC have long objected to the use of trusts (and similar vehicles) to deliver cash bonuses at low rates of tax and it seems clear that these arrangements will no longer be able to operate in the same way. The impact on international employees may be especially complex.”

According to Ernst and Young, the key points of the draft legislation are:

  • The new rules will impose a PAYE (pay-as-you-earn) and NIC (National Insurance contributions) charge (and employer withholding obligation) on amounts ‘earmarked’ or transferred by third parties for the benefit of employees;
  • The changes will take effect from April 6, 2011, but anti-forestalling rules will apply with effect from December 9, 2010;
  • The charge will apply to any reward, recognition or loans;
  • There may be a degree of initial uncertainty about the way the legislation operates: it includes unusual features such as conditions of ‘reasonable supposition’ and applies to agreements ‘however informal’; and,
  • There are to be exemptions for approved share plans, registered pensions and compassionate benefits (eg. on death and ill heath) and certain ‘all-employee’ arrangements.

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The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




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