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Employee benefit changes as of April 2011

09 May, 2011

Taxation of employee benefits includes several new provisions as from April 2011.

HM Revenue & Customs (HMRC) is offering employers who have used Employee Benefit trusts ('EBT') (and similar arrangements) the opportunity to resolve outstanding enquiries. These arrangements seek to minimise the Income Tax and National Insurance charge on remuneration to employees and directors and may also generate a claim for Corporation Tax deductions for payments into the trust. The Finance (No. 3) Bill 2011 published on 31 March 2011 introduced new legislation to put beyond doubt that such arrangements or schemes do not work. HMRC’s view on these schemes under existing legislation was notified in Spotlight 5 and published in November 2009.

Employee Benefit Trusts refer to when an employer pays money into a trust for it later pass to employees thereby hoping to avoid or reduce income tax and national insurance. The HMRC believes that these arrangements are not effective and the legislation has been introduced to put the matter beyond doubt.

For employees who start work from 6 April 2011, the tax-free limit for childcare vouchers is reduced. For those earning the higher tax rate, the £55 tax-free limit is reduced to £28. For the 50% taxpayers the limit is reduced to £22.

The reduced rates do not apply to employees that had a child and were receiving childcare vouchers before the 6th April 2011.  

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