Budget2011: Government hopes to collect £750m a year from disguised remuneration legislation

LEGISLATION TO TACKLE disguised remuneration will make the Exchequer around £750m a year, the government has announced.

The Budget document said that £3.77bn would be made in this Parliament from the legislation at a steady rate of around £750m a year.

The new rules were published in draft form in December 2010. It was designed to penalise people who use arrangements involving offshore vehicles, including employee benefit trusts and employer financed retirement benefit schemes, to defer liabilities. However, the legislation was wider ranging than had been intended and HM Revenue & Customs was forced to issue a factsheet of frequently asked questions earlier this year to clarify what was included.

The Budget Book said that the measure will ensure "that where a reward or a loan is provided, via a third party, in connection with the employee's employment, an income tax charge arises and the employer is required to account for PAYE".

Cathy Corns, partner at Mercer & Hole, said that the possibility of collecting this tax depended on what they are basing the figure on.

"If they are hoping to collect it from funds already in the structure, then this may not be possible," she said. "If they are saying that the £760m is what they have been losing from these arrangements, then it may be realistic, as they have blocked the loopholes for that type of planning."

Colin Keane, senior director at Alvarez & Marshal, said: "HMRC has been trying to find out the full extent of these arrangements. The question is, what evidence have they based their estimates on? It could be higher than this. These are the most highly paid people in their companies."