Employer Financed Retirement Benefit Schemes (EFRBS) reporting

Broadly, an EFRBS is an arrangement to provide a lump sum, gratuity or other cash or non-cash benefit (other than, normally, pension payments) to or in respect of an employee or former employee. This includes retirement and death related benefits.

Some types of pension arrangements (e.g. registered pension schemes) and benefits (most pension payments and, for example, benefits in respect of accidental death during service) are specifically excluded from the EFRBS regime. Additionally, special considerations apply to arrangements established outside the UK.

Subject to those points, the EFRBS rules have a very broad scope. For example, an EFRBS does not need to be formally established (e.g. as a trust) and need not be in a particular form. Also, in HMRC’s view, an EFRBS doesn’t need any prior understanding between an employee and employer that relevant benefits will (or could) be provided. For example, an EFRBS could be constituted by:

• A stand-alone decision at an employer’s meeting;
• A single decision by an employee with delegated authority or in accordance with a company policy; or
• A situation where it has become customary for the employer to make a payment to a particular class of employees.

So, though an employer might recognise that a trust established to provide senior executives’ retirement benefits outside a registered pension scheme is an EFRBS, an EFRBS that comes into existence when, for example, medical benefits are provided to an employee’s widower from company funds (without the use of a trust or other intermediary) could be overlooked.

This means that employers could fail to meet reporting – and withholding – obligations that arise under the EFRBS legislation, which could give rise to significant and unexpected tax liabilities. It’s therefore important that employers are aware of what steps could, potentially, create an EFRBS and obtain appropriate specialist advice in advance of taking any relevant action.

An EFRBS must be registered with HMRC on or before 31 January following the end of the tax year in which it comes into operation (so an EFRBS that came into operation during tax year 2024/25 should be registered with HMRC on or before 31 January 2026).

An EFRBS will ‘come into operation’ when the employer makes the first contribution to the arrangement (e.g. where it has been established using a trust or other intermediary) or, if earlier, when ‘relevant benefits’ are first provided (note though that pension payments, in particular, will not normally be ‘relevant benefits’).

Depending on how an EFRBS has been established and run, the obligation for registering it can sit either with the scheme trustee or manager, or with the relevant employer. Also, if an EFRBS has been established using a trust, the trustees might be required to register the trust itself with HMRC’s Trust Registration Service.

Relevant benefits that an individual receives from an EFRBS are usually taxable as employment income (although some reliefs/exemptions can apply) which, if those benefits are in the form of cash or ‘readily convertible assets’, are normally subject to PAYE.

As well as any payroll withholding obligations that arise in relation to an EFRBS, the scheme trustee/manager or relevant employer (as appropriate) must send HMRC certain details of relevant benefits provided under the scheme no later than 7 July following the end of the relevant tax year.

Depending on how an EFRBS is set up and operated, the relevant reporting obligations can fall on the scheme trustee or manager rather than on the employer. However, the employer still has a reputational interest and governance role in ensuring that EFRBS are registered on time, that relevant benefits are correctly reported, and that the information provided to HMRC is complete and correct.

As part of their usual year-end reporting, employers should ensure they have identified any EFRBS that came into operation during 2024/25 in relation to their employees and former employees, and report these to HMRC on or before 31 January 2026.

They should also ensure that any relevant benefits provided under their EFRBS during 2024/25 were correctly subjected to PAYE if in the form of cash or ‘readily convertible assets’ and were reported to HMRC by 7 July 2025.

Penalties can apply for the late registration of EFRBS and/or late reporting of relevant benefits. Employers should therefore ensure that all EFRBS which operate in relation to their employees and former employees are registered with HMRC by the scheme trustee/manager or, as appropriate, by the employer itself, and that any relevant benefits provided are subjected to PAYE as appropriate and reported to HMRC by the relevant deadlines.

Where any failure to register an EFRBS or to report or operate PAYE on relevant benefits in an earlier year is identified, this should be disclosed to HMRC and corrected without delay. The employer should also implement appropriate processes to ensure that any EFRBS that might come into existence in the future are identified so that the associated registration, withholding and reporting obligations can be discharged correctly.

For 2025/26, as we come towards the end of the tax year, and bearing in mind the broad definition of an ‘EFRBS’, employers should satisfy themselves that they’ve identified all EFRBS established during the year and continue to monitor the position.

Please get in touch with the authors or your usual KPMG in the UK contact to discuss EFRBS, or how we could support your EFRBS compliance, in more detail.

For further information please contact:

• Alex Thornton
• Rhys Thomas