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: