Despite amendments to its proposals the Government's Disguised Remuneration legislation has been branded "far too complicated" by the Chartered Institute of Taxation (CIOT). It "risks creating problems as well as solving them".

Weighing in at 59 pages, with 14 separate anti-avoidance tests the proposed measures aim to comprehensively target tax planning arrangements involving third parties and aim to defer or avoid:

  • employment income tax and
  • restrictions on pensions tax relief.

EBTs and EFRBs have been popular with the tax avoidance industry for over ten years, leading to the creation of thousands of tax avoidance schemes. A denial of tax relief was not unexpected, however, the danger is that if the legislation is too complex to understand HMRC will have trouble ensuring that employers follow it.

Colin Ben-Nathan, Chairman of the CIOT's Employment Taxes Sub-Committee says,

"The new legislation is penal and it overrides the longstanding rules under which benefits in kind are normally taxed."

"We think that employers will face real difficulties in trying to assess how they stand and that they are likely to need to take advice to arrive at a considered view. We suspect many will seek clearance from HMRC and we wonder whether HMRC has the resources to cope."

The CIOT's concern is that the new rules will impact on mainstream situation such as share plans, some pension schemes, joint ventures, private equity structures and if so will affect international businesses and drive them out of the UK.