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HMRC internal manual

National Insurance Manual

NICs avoidance: employment income provided through third parties: Employer Financed Retirement Benefit Schemes - general

An EFRBS is an arrangement financed by an employer to provide retirement benefits, (for example, pensions, lump sums on commencement of retirement, death benefits, etc.,) to particular persons, usually the employer’s employees/ directors. An EFRBS does not include registered pension schemes.

As the beneficiaries of such schemes are usually an employer’s employees/ directors, an EFRBS usually involves a third party such as a trustee or group of trustees. In many cases employers will establish an Employee Benefit Trust, managed by trustees, to provide retirement benefits. For guidance about EFRBS see NIM02750.

Some of these schemes have been used to avoid NICs and different types of tax, including income tax, Corporation Tax, and Inheritance Tax.

Although there are some payments into and from an EFRBS which can be disregarded from earnings so that Class 1 NICs are not due, it is important that when determining the NICs position in relation to an EFRBS, to consider the application of Part 7A ITEPA 2003 and NICs equivalent legislation, see NIM52000.