ARTICLE · 28 MARCH 2011

Proposed Disguised Remuneration Rules - Budget Update

CMS Cameron McKenna Nabarro Olswang

Explore more from CMS Cameron McKenna Nabarro Olswang

From our previous Law-Nows, you will have seen that the Government proposed legislation in December 2010 which would cause an automatic income tax and NIC charge to arise on "disguised remuneration" arrangements.

United KingdomTax

Nicholas Stretch

Tair Hussain

Isabel Pooley

From our previous Law-Nows, you will have seen that the Government proposed legislation in December 2010 which would cause an automatic income tax and NIC charge to arise on "disguised remuneration" arrangements. It catches the following situations:

"earmarking" funds for an employee (in effect reserving them for the employee, without any formal declaration of ownership, which could include shares intended to meet a share award if it vests)
pay money or transfer an asset for an employee's benefit
make an asset available for an employee's benefit.

The draft legislation published in December 2010 clearly captures loans from trusts and also unapproved pension arrangements (eg EFRBS). As the proposed tax charge is on the full amount of the funds in question, there was understandable concern as there was no potential for reclaiming the tax if the share award or other remuneration did not ultimately vest or was not exercised because performance conditions were

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