Pensions and employment taxation
Inheritance tax and pensions
Statutory backing will be given to the current
concessionary inheritance tax (IHT) treatment for pension scheme members who
die before age 75. There will be no IHT charge where the recipient of any death
benefits is a spouse, civil partner or someone financially dependent on the
scheme member. An IHT charge will also not arise in other cases where the
member, while in good health, chooses not to buy a scheme pension or annuity,
even if their health subsequently deteriorates.
Where death occurs at age 75 or later and the
individual is drawing an ‘alternatively secured pension’ (ASP), any
‘transfer lump sum payment’ (ie transfer to another scheme member)
will be subject to IHT, unless the recipient is a spouse, civil partner or
someone financially dependent on the scheme member. Death benefits paid to
charity will be IHT free.
Similar provisions apply where an ASP death benefit
becomes payable on the subsequent death of a surviving spouse, civil partner or
financial dependant. The lump sum will normally be treated as an addition to
the deceased member’s estate. The scheme administrator will be responsible
for accounting for and paying any IHT due.
Pension lump sum recycling
Amendments have been made to the draft legislation to
prevent the recycling of tax-free lump sums as further tax-relieved pension
contributions. The anti-avoidance measures will not apply where no more than
30% of a lump sum is recycled or where the lump sums are less than
£15,000. This threshold will be increased in line with the standard
lifetime allowance.
Exemptions for computers and mobile phones
The value of benefit in kind of computers loaned to
employees will no longer be exempt from tax from 6 April 2006. From the same
date, the tax exemption for mobile phones loaned to employees will be
restricted to one phone per employee and will not extend to members of the
employee’s family or household.
Computer screen and other VDU users – eye tests
and glasses
From 6 April 2006, there will be no tax charge where
an employer pays for an eye test and/or corrective glasses by providing a
voucher to employees who use VDUs – eg computer screens. This brings the
treatment of vouchers into line with other methods of reimbursement.
Employer-related securities
With retrospective effect from 2 December 2004, any
reward from employment obtained by employees from avoidance schemes using
options over shares or securities will be fully subject to national insurance
contributions and income tax through PAYE.
Company cars
The figure for the company car fuel benefit charge
will remain at £14,400 for 2006/07. The CO2 emissions level
for the minimum petrol percentage charge of 15% will stay at 140g/km for
2006/07 and 2007/08, but will fall to 135g/km from 2008/09. From 2008/09, there
will also be a new 10% rate for cars with emissions of 120g/km or less.
The summary has been prepared very rapidly and
may contain errors for which we cannot be held responsible. The proposals are
in any event subject to amendment before the Finance Act is passed. Advice
should be taken before any action. |
