A number of directors will have a keen interest in reducing both corporation tax (and also employer's National Insurance) and personal levels of income tax. In particular, a number may enjoy a high level of earnings in excess of the earnings cap which has been increased to £99,000 for tax year 2003/2004.
Where such directors are unable to pension their earnings over the cap by means of an approved occupational scheme (as they are neither pre 87 nor 87-89 regime members) they should give serious thought to the establishment/use of a Funded Unapproved Retirement Benefits Scheme (FURBS) to pension these. While this latter arrangement offers no special corporation tax, NIC or income tax benefits at outset (the contributions, usually being deductible as a business expense, but assessable to income tax on the director and, within the normal limits, subject to NIC) they can offer
- an income tax and capital gains tax reduced home for investments
- IHT free payment to dependants on death of a member before taking benefits
- benefits payable wholly in cash
There is at present some confusion how FURBS benefits will be treated under the new simplified pensions tax regime. Clarification is expected on this in the Revenue's further consultation paper which is due to be issued in late summer/early autumn. It may be prudent to leave any FURBS contribution until after then when their tax position under the new regime has been set out.