Avoidance of Corporation Tax
HMRC is aware of schemes where companies claim a Corporation Tax deduction for employer contributions to an EFRBS scheme on the basis that either (a) the contribution to the EFRBS or (b) a subsequent transfer to a second EFRBS is a ‘qualifying benefit’. This would allow the company to secure a Corporation Tax deduction before any benefits are actually paid by the scheme to the employee. Our view is that neither transaction involves the provision of a ‘qualifying benefit’. Whilst it has been argued that there may be some ambiguity in the law around the meaning of the phrase ‘transfer of assets’ since it does not state to whom the transfer is to be made, in our view the context resolves any ambiguity. The law defines ‘qualifying benefits’ and such benefits are plainly, from the context, benefits that if paid under the terms of an EFRBS might fall within the employment income charge. So in that context, a ‘transfer of assets’ should be interpreted as a transfer that could give rise to such a charge. This will primarily mean a transfer of assets to the employee but also includes a transfer to a member of the employee’s family. Neither an employer contribution to an EFRBS nor a transfer between EFRBS gives rise to a possible employment income tax charge on the employee. So there is no ‘qualifying benefit’ entitling the employer to a deduction.