Executive Summary of ‘Lazarus’ with ‘Pre-GAAR
This document covers:
Lazarus with Pre-GAAR Steps
Benefits and risks
Fee Clawback Service
Suitable clients are companies with annual pre-tax profits exceeding £250,000.
The General Anti-Abuse Rule, or the “GAAR”, is new legislation which will come into effect at Royal Assent of the
2013 Finance Act. This is expected to be mid-July.
Under the GAAR, any tax planning arrangement that is “Abusive” will be counteracted on a just and reasonable basis.
However, where an arrangement is entered into before Royal Assent and all that happens post Royal Assent is the completion of that…show more content… Other tax and commercial benefits of Lazarus include:
Only 1% Income Tax on the payment to the Payee
No Capital Gains Tax on investments through the EFRBS (should the Promise be fulfilled early and provided the EFRBS is resident outside the UK)
Funds / Assets sitting in the EFRBS are free from UK Inheritance Tax (IHT). This will be beneficial for clients who are looking to secure funds for future generations.
In the event that the Deed of Promise is still outstanding on death, this will form a debt in the estate for IHT purposes. Retention of key employees: the entering into of the Plan, and subsequent contributions made to the
EFRBS, will serve as a very strong motivation and incentive to those employees who are potential beneficiaries. As the EFRBS is not an HMRC registered scheme, it is not affected by the annual or lifetime limits that apply to registered pension contributions.
The risk of Lazarus with Pre-GAAR Steps is that the tax that would otherwise have been payable becomes payable to
HMRC. Interest would be due on late payment of tax but penalties would be extremely unlikely due to full disclosure to
HMRC and reliance on Tax Counsel opinions.