RegulationDec 3 2014

Tax benefits of salary sacrifice axed

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by

In his fifth Autumn statement, the chancellor unveiled measures to prevent payments of benefits in lieu of salary, in a move some suggested could impact on pension contributions.

The miscellaneous income against which a miscellaneous loss can be relieved has been limited, a three-page policy statement released by HM Revenue and Custom as part of the Autumn statement, has revealed.

Currently, Section 152 of the Income Tax Act 2007 (ITA) details the income tax loss relief rules for losses arising from miscellaneous transactions. It allows a person who has made a loss in a tax year from a relevant transaction to claim loss relief against certain income.

Legislation that is set to be introduced in Finance Bill 2015 will deny a person miscellaneous loss relief for income tax purposes, where that loss arises as a result of relevant tax avoidance arrangements.

For this purpose “relevant tax avoidance arrangements” are arrangements to which the person is party and the main purpose, or one of the main purposes, is to obtain a reduction in tax liability by means of loss relief under section 152 of the ITA 2007.

Other measures announced today (3 December) include restricting corporation tax relief where a company acquires internally-generated goodwill and customer related intangible assets from related individuals on the incorporation of a business.

This measure will be introduced in the Finance Bill 2015 but will have effect from today (3 December), subject to Royal Assent.

It will apply to all transfers on or after 3 December unless made pursuant to an unconditional obligation entered into before that date.

Where an accounting period commences before 3 December, the accounting period is split so that this measure only applies to debits arising from the notional accounting period commencing on 3 December.

emma.hughes@ft.com