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Employer-Financed Retirement Benefits Schemes – New excluded benefits for former members of the armed forces
Friday, September 23rd, 2011
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New regulations allow certain fees to former members of the armed forces and their family members to be exempt from tax.
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 are exempt if they are provided to the employee after retirement or to the employee’s family after the employee dies.
By means of new amendments to the 2007 Regulations, certain payments made by the Ministry of Defence (MOD) to former members of the armed forces, or in certain specified cases, to members of their family, are exempt from tax under section 394. These payments are:
- the payment of tuition fees in respect of the provision of further and higher education
- lump sum payments under the resettlement commutation, resettlement grants and gratuity earnings schemes, and
- the provision by the Royal British Legion, partially funded by the MOD, of free, independent and expert legal inquest advice and assistance for families of those who have died in service.
Further information:
