The Finance Act 1989 introduced the Earnings Cap in relation to tax exempt approved pension schemes and at the same time allowed those restricted by the Earnings Cap to provide additional benefits by way of a FURBS.
A FURBS is different from any other pension scheme and is more like a tax efficient Trust arrangement.
A FURBS is set up by an employer for an employee(s) – predominantely directors and key employees and the contribution paid to the FURBS is treated as a benefit in kind on the employee for tax purposes.
There are no restrictions on how the funds are invested, unlike with approved pension schemes, and although any capital gains are taxed at 40% (with the usual taper reliefs available) investment income is taxed effectively at 0%, 20% or 22% depending on the nature of the income. This is favourable when compared with the taxation position of a higher rate tax payer.
The entire fund can be taken as a tax free lump sum or deferred where on death the fund may be paid to beneficiaries normally free of tax.
Like a SSAS the member(s) will normally be a Trustee(s), however, there is no mandatory requirement to appoint a Pensioneer Trustee. Richard Pedro & Company would recommend that a Pensioneer Trustee is utilised as a FURBS is administered in a similar way to a SSAS.
Richard Pedro & Company will prepare all paperwork to establish a FURBS and any subsequent wind up as well as undertaking all negotiations with the Inland Revenue on behalf of the Trustees.
- Preferential tax rates to higher rate tax payer on investment income.
- No investment restrictions (investments should be on commercial terms).
- Full control of fund by member(s).
- Contributions paid by sponsoring employer treated as pensionable remuneration therefore they may enhance maximum benefit entitlement for member of tax exempt approved pension scheme.