News, Views & Case Studies

The HMRC statement released on 9 December 2010 contained provisions aimed at reducing tax advantages. These could be obtained by utilising EFRBS and other methodology they consider have been artificially created in order to obtain a tax advantage.

The Castle Trust Group offers a wide range of services to clients based in many countries. Whilst not specifically targeting any specific market within the EU we are aware that the proposed legislation recognises and still permits genuine commercial arrangements in certain circumstances. We understand a number of clients may be interested in knowing that we are in the course of obtaining Counsel's opinion which confirms that some of our products and services will be treated as outside the proposed new legislation. If you would like to receive further details please let us know. We are expecting to receive final written confirmation by mid-January 2011.

We can also confirm that the Retirement Annuity Plans used by expatriates, especially in Spain, continue to provide a number of fiscal advantages going into the new Spanish tax year from 1 January 2011. We are anticipating opening a further office in Malta in Q1 2011 and would be glad to provide further details to interested parties.

For further general information on the above please contact Elaine Boyden: Elaine.Boyden@castletrustgroup.com.

The Castle Trust Group has a number of alternative strategies to EBTs and EFRBS which we are currently seeking confirmatory opinion upon. Clients should contact us directly.

Following new legislation announcements from HMT today, the Castle Trust Group immediately requested Counsel to further opine on their newly launched Deferred Variable Annuity Contracts. It is anticipated this will be positive and further information will be posted shortly.

A report in the Times, 6 December 2010 stated: "Private sector pensions could be 50% higher for the same amount chipped into them if Britain moved to a completely different style of pension scheme, a leading think tank believes. It points to Pension funds run in Denmark and the Netherlands, where for the same amount of pension contributions, pensioners receive 50% more than they would in Britain. The RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce", urged employers to consider introducing "collective defined contribution" schemes, a kind of pension fund unknown in the UK.

ATP, the Danish national pension fund, is talking to British employers about running new hybrid schemes for them.

The Castle Trust Group observe the highest industry standards in dealing with client set up arrangements. Where possible we operate a cooling off period. For clients wishing to set up EFRBS, we can provide a seven day cooling off period whereby a full fee return agreement is made. For those wishing to complete transactions before 9 December 2010, this may be a useful point to bear in mind.

Pension planning for EU Nationals - not dependent upon local country specific legislation.

We have been issuing a general retirement product based upon a flexible annuity for some time. We are aware that this is attractive to UK companies as well as certain individuals. Undertaken properly this planning provides a full Corporate deduction and leaves the pension beneficiary taxable only upon the receipt of pension. Combined with other incentivisation programmes, this enhances retention of staff, typically of those in their mid 30s onwards.

Please use contact form on the right to request further information

No further news on the finalisation of the QROPS situation in Gibraltar although it is understood relevant parties are working upon this.

It was initially expected that the first date when the proposed draft clauses would be presented could be included in the Autumn statement announced yesterday. This did not occur and it is now widely thought a consultative paper will be released on or around 9 December 2010. Again, it is debatable whether such changes will be effective from that date, some time before or upon actual enactment of the legislation.

Planning point: EBTs and EFRBS should be reviewed and action taken immediately. We can form EBT and EFRBS arrangements usually within 72 hours (subject to all the necessary due diligence.)

It is now anticipated an announcement will appear in the Autumn statement regarding changes to the EBTs and EFRBS based arrangements.

HMT today released a statement which confirmed the annual allowance from April 2011 will be set at £50,000. A reduction in the lifetime allowance to £1.5m will take place from April 2012. Included in this statement were also references to EBTs and EFRBS. The June 2010 budget confirmed that the Government will take action against intermediary vehicles, including EFRBS, being used to disguise remuneration and avoid, reduce or defer payment of taxes. HMT said (in paragraph 2.31 of the statement) "it would bring forward legislation as part of the consolidated draft clauses planned for the Finance Bill 2011 due to be published for consideration towards the end of 2010, that will ensure that funded EFRBS are less attractive than other forms of remuneration".

Commentary: HMT are aware of the extensive use of EFRBS. It is probable that some kind of change will take place so that a loan from an EFRBS is taxed in such a way that it is treated as some form of remuneration with all the tax consequences that would accompany such a change. The aim would be to negate current tax advantages in loan structuring back from an EFRBS.

From when this change would be effective is open to debate. We have seen examples of retrospective legislation and this should not be ruled out. However in view of the above statement, it would appear reasonable that a change would take place following the issuance of the draft clauses originally planned for the Finance Bill 2011. It is possible, upon announcement, although not finalised as legislation, the effective date could be applicable from then.

Planning point: Action required to review current EFRBS. Those contemplating EFRBS planning for 2010 should form and put in place the arrangements as soon as possible.

Steven Knight, Managing Director of the Castle Trust Group was appointed Chairman of the Association of Pension Fund Administrators in Gibraltar.

HMRC have now raised enquiries as to whether the Gibraltar tax legislation is fully compliant with the UK QROPS requirements. To provide a combined voice, a Gibraltar based Association of Pension Fund Administrators has been formed. Detailed correspondence is currently in progress between HMRC and Gibraltar QROPS providers, via the Association. An extension until 30 September 2009 has been agreed between all parties so that the matter can be considered more fully. In the meantime, HMRC have placed on notice all Gibraltar QROPS providers that if the final determination by HMRC is that Gibraltar legislation does not provide an appropriate platform to which UK schemes can be transferred, then any transfers made to a Gibraltar scheme after 6 April 2006, will be subject to an "exit charge", currently 55%.