Employer-Financed Retirement Benefits Schemes - New excluded benefit after retirement or death

Written by Ian Congreave - Filed under: Pension Schemes, Statutory and Other Payments and Deductions on November 4th, 2009

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Section 394 of the Income Tax (Earnings and Pensions) Act 2003 imposes a tax charge on the provision of relevant benefits from an employer-financed retirement benefits scheme (EFRBS). For example, if a retired employee continues to be provided with private medical insurance, it is fully taxable under these rules.

Certain specified benefits are, however, excluded from a tax charge. They include, for example, benefits from an EFRBS in the event of ill-health, disability or death during service. In addition, as set out in the Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) Regulations 2007, certain benefits that were not taxable during employment continue to be exempt if they are provided to the employee after retirement or to the employee’s family after the employee dies.

By means of new amendment regulations, an additional benefit has been added to the list of exempt benefits. This is the provision of a health-screening assessment or medical check-up if

the benefit would have been exempt from tax if the employee were still in employment, and

the employee had been provided with at least one such assessment or check-up during the employment.

The benefit is only exempt from tax, therefore, if it is an on-going benefit. If it is a new benefit, provided for the first time after retirement, it is taxable under the section 394 reporting rules.

The exemption applies to health-screening assessments and medical check-ups provided from the 2006/07 tax years onwards.

Further information:

The Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) (Amendment) Regulations 2009

Explanatory Memorandum to the Employer-Financed Retirement Benefits (Excluded Benefits for Tax Purposes) (Amendment) Regulations 2009