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Employer-arranged pension and legal advice exemption

By Ian Holloway, head of legislation and compliance at Cintra HR & Payroll Services

The snap decision to hold a general election caused a number of Parliamentary Bills to be dropped and these have gone for the time being (as bills cannot carry forward from one parliament to the next). However, a number were sped through with amendments, thereby ensuring the maximum amount of legislation could pass through without discussion or objection before the parliament was dissolved on 3 May 2017. Doing business in this way is what is referred to as parliamentary “wash-up”.

One of these amended bills was the Finance (No. 2) Bill 2017 which was enacted on 27 April 2017 and is now the Finance Act 2017. Two important clauses were dropped from the bill, both of which were supposed to be effective 6 April 2017 and both of which affected our reward profession.

The employer-arranged pension advice exemption (Clause 12)

Regulation 5 of the Income Tax (Exemption of Minor Benefits) Regulations 2002 allows tax and NICs relief of £150 for employer-arranged pension advice. Budget 2016 announced that this would increase to £500. To do this, however, required a revocation of the 2002 regulations and the insertion of a new statutory exemption for £500 into Part 4 of the Income Tax (Earnings and Pensions) Act 2003.

This did not happen.

Employer-funded legal advice or indemnity insurance (Clause 13)

Currently, when an employer pays for legal support or indemnity insurance for employees to cover costs connected with employment-related matters, it is only free of a tax liability for employees if allegations are made against them. There is no equivalent relief available for proceedings that may occur without an allegation having been made. So, for example, support given by the employer to an employee to enable or support them to testify in court would be classed as a taxable benefit.

Autumn Statement 2016 announced that, from April 2017, relevant sections of the Income Tax (Earnings and Pensions) Act 2003 would be amended to extend the tax-exemption to apply to all employees that needed legal support. In addition, this legal support was extended to cover costs paid by the employer for individuals subject to a termination payment.

This did not happen either.

The result of Clause 12 and 13 being withheld from the Finance Act left employers, individuals and advisors in a state of limbo. There was the possibility that these might be reintroduced later in 2017; however, would they be retrospective to 6 April 2017? A 5 May 2017 e-mail from HMRC’s Customer Directorate is currently doing the rounds and provides some comfort. In its entirety, this says:

_Dear all,

I am contacting you to provide a short update on the changes for employer provided Pensions advice and Legal advice (clauses 12 and 13 in the Finance Bill 2017 published on the 20th March). As you know, these changes were due to be legislated in the Finance (No.2) Bill 2016-17. Due to the forthcoming election the Financial Secretary to the Treasury has now announced that, as is usual at this stage before an election, the Finance Bill would proceed on the basis of consensus and the government would not be proceeding with a number of clauses in the Bill, including these changes. The Financial Secretary also said there has been no policy change and the government would legislate for the provisions at the earliest opportunity in the next Parliament. It will be for the incoming government to decide what to recommend to Parliament. Please continue to apply the guidance published at HMRC guidance – EIM 21802 and HMRC guidance – EIM 30509, we will provide an update in due course.”_

Posted on 9th May 2017 by Jerome Smail



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