What does a US tax law which is meant to thwart tax avoidance by highly-paid US executives have to do with UK businesses? Quite a lot, if those businesses have any operations in the US or employ or contract with US citizens anywhere in their organisations, and if the law is as broad in application as section 409A of the US internal revenue code. The time is growing short for those businesses to resolve the issues section 409A creates and, if they do not act, they will expose personnel that are subject to US tax to a risk of severe financial penalties.
Section 409A was adopted in 2004 in the wake of corporate scandals earlier in the decade, from which many executives were perceived to have emerged unscathed after pocketing large sums of deferred income. However, such is its complexity that the US Internal Revenue Service has repeatedly delayed the implementation of many of its provisions. The most recent, and most likely final, delay, which extended the deadline for full compliance until the end of this year, occurred in late 2007. Even with these delays, it has always been necessary to operate deferred compensation arrangements in good faith compliance with the law.
