Unfair shares of the profits: Tax law on profit-sharing can penalise male pensioners. Neasa McErlean reports

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The Independent Online
DISCRIMINATION between the sexes is alive and well - and sometimes even thriving - under the endorsement of the Inland Revenue.

Unusually, however, the latest tax anomaly to come to light is one that favours women over men, and in certain circumstances, a female employee will find herself with a tax bill half the size of that facing a male colleague.

The problem revolves around government-approved company profit-sharing schemes, under which employees can acquire shares in the company in a tax-saving way. If the shares are kept in the scheme for five years, the employee will not be subject to income tax on their value.

Sometimes, however, employees leave the schemes early because they retire or are made redundant. To soften the potential tax liability, the Inland Revenue gives these employees more favourable treatment than others who quit schemes early. But a quirk of the legislation denies this benefit to certain male employees retiring early.

For schemes established after 25 July 1991, pensioners who leave schemes early will be subject to tax on only 50 per cent of the initial value of their shares. These schemes are required to have a common retirement age - and employees leaving will be taxed the same way regardless of sex.

But under pre-July 1991 schemes, employees are subject to tax on 100 per cent of the original value if they leave in the first four years. If they leave in the fifth year, they pay tax on 75 per cent of the original value.

Whatever the specified common retirement age which a company now operates under the scheme, it will find that, in the eyes of the Inland Revenue, men will be regarded as retiring at the age of 65 and women at 60, for the purposes of a scheme established before 25 July 1991.

Consequently, a man retiring before that age will be forced to pay tax on 100 per cent or 75 per cent of the original share values, while female colleagues retiring at the same age or younger would be taxed on 50 per cent.

Overnight, some male pensioners will find their nest egg has turned into a financial noose.

'The effect is inequitable,' says Nilgun Izzett of the law firm Theodore Goddard. 'If you are trying to be a good employer and ensuring people are treated equally, it's a little unfortunate if all your efforts are, in a sense, thwarted because of the Government's tax policy.'

(Photograph omitted)