The Inland Revenue has announced a new tax exemption that will enable employers to give their employees access to valuable pensions advice without incurring a tax charge.
Regulations laid yesterday exempt from income tax the benefit of pensions advice and information provided to an employee on behalf of an employer.
The exemption will apply where the benefit is generally available to all employees and below a limit of £150 for each employee per year.
If the cost to the employer is higher than £150 the whole amount will be subject to tax. Other advice on investment, tax or legal matters will not be covered by the new exemption.
Most pensions information and advice provided by employers to employees is unlikely to give rise to an employee benefits tax charge, the Revenue said.
But where an employer pays outside consultancy fees for seminars, or for one-to-one sessions on financial advice for employees, a tax charge is likely to arise on that cost.
A decision to introduce legislation to exempt this benefit was announced in the March 2004 Budget. The regulations come into force on 14 December 2004.
Paymaster general Dawn Primarolo said: “It is important that employers should be able to provide pensions information to their employees, empowering them to make informed choices about their retirement.
“The regulations … will ensure employers can provide access to this information and advice without a tax charge arising and so encourage employers to provide this valuable support to their staff.”
Pensions minister Malcolm Wicks said: “These regulations reinforce our position that employers should provide employees with access to a decent standard of pension information and advice in the workplace.
“New powers, to be introduced in the Pensions Bill, will go further and require those companies with low levels of employer contribution and pension take-up to ensure information and advice is available. This new tax exemption demonstrates the Government’s commitment to ensuring that employees get access to the information they need in order to plan for their retirement.”
The regulations also extend the existing exemptions in sections 261 (recreational benefits) and 317 (subsidised meals) of ITEPA 2003 to cover employees working at the premises of another employer.
Andrew Goodall
editor@taxzone.co.uk
