Treat as if law had been enacted: Higher tax exemptions for employer provided pensions advice and legal advice

HMRC has confirmed that employers should treat the changes for employer provided pensions advice and legal advice (formerly clauses 12 and 13 in the Finance Bill 2017 published on 20 March 2017) as having been effective from 6 April 2017. Employers should continue to apply the guidance published at HMRC guidance EIM 21802 and HMRC guidance EIM 30509 which explains the two provisions.

Both of these changes were due to be legislated in the March 2017 Finance Bill. Owing to the forthcoming election the Finance Bill 2017 proceeded on the basis of consensus between the government and opposition parties in Parliament and a number of clauses, including these two changes, were dropped from the Bill that was enacted on 27 April 2017. The Financial Secretary has said that there has been no policy change and that the government if re-elected will legislate the provisions at the earliest opportunity in the next Parliament. We welcome these reassurances.

Pensions advice

There will be a new income tax exemption to cover the first £500 worth of pensions advice provided to an employee (including former and prospective employees) in a tax year. It will allow advice not only on pensions, but also on the general financial and tax issues relating to pensions, allowing individuals to make more informed decisions about saving for their retirement. The changes replace existing provisions which limited the exemption solely to pensions advice and was capped at £150 per employee per year.

Legal expenses

An extension to existing reliefs for employees (or former employees) who may require legal advice or indemnity insurance which is funded by their employer. Currently, such costs are only deductible from earnings for employees who have had allegations made against them in their capacity as an employee (a liability). This new measure provides equivalent deductions to be available in relation to proceedings where no allegation has been made or is expected to be made against the employee, for example, where an employee is asked to give evidence before a public hearing when they might also require legal advice and support. It also extends the reliefs for individuals on termination of employment (or for individuals now deceased) so that a deduction is allowable if the relevant costs are met by the employer on behalf of the individual.