In November 1997, a Contributions Agency Press Release announced
that legal advice had confirmed that most payments into and out of
FURBS were “earnings” for NICs purposes. Prior to that
date guidance issued to employers in respect of NICs did not make
specific mention of FURBS. It was therefore decided not to collect
arrears of NICs on payments paid into FURBS before 6 April 1998
unless the scheme did not actually provide a
genuine pension.
This means that NICs will be enforced on payments into FURBS
before 6 April 1998 only if money goes into and out of the trust in
an effort to avoid the payment of NICs; as in the following
example:
A director of a company usually draws an annual bonus of
£500,000.
At the suggestion of his financial adviser, the director
does not draw the £500,000.
The company sets up a FURBS as a trust with the director and
his spouse as sole trustees.
The company pays £500,000 into the trust.
Two weeks later the trustees award the director
£500,000 out of the trust.
NICs should be enforced in this situation as the payment out
of the trust (the £500,000) is not a genuine pension.
See
NIM02156 for further information
regarding FURBS and NIC avoidance.
For details of the Class 1 NICs position on payments made
into an employer-financed retirement benefits scheme from 6th April
2006, see
NIM02755 (overview) and
NIM02757.
