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Autumn Statement 2014 – Changes to Employment tax
4 December 14 | By: Jas Jhooty
The full text of this year’s Autumn Statement can be found here.
RATES & ALLOWANCES
From April 2015 the Income Tax personal allowance will increase to £10,600. The basic rate limit will be £31,785 so the higher rate threshold above which individuals pay Income Tax at 40% will be increased to £42,385.
National Insurance Contributions – Employer contributions
From April 2016 employer National Insurance Contributions up to the upper earnings limit for apprentices aged under 25 will be abolished.
National Insurance Contributions – Employment Allowance
From April 2015 the £2,000 annual Employment Allowance for employer National Insurance Contributions will be extended to care and support workers.
OTS RECOMMENDATIONS & ANTI-AVOIDANCE
Following recommendations by the Office of Tax Simplification (OTS), the government will reform the rules for employee benefits and expenses. These proposals will make the taxation of benefits and expenses more straightforward and effective, reducing the administrative burdens on employers by an estimated £20 million per year. In addition, the government will accept or further consider 51 recommendations made by the OTS to improve the competitiveness of UK tax administration.
As part of its reform of the rules for employee benefits and expenses in response to recommendations by the OTS, the government will stop tax relief from being claimed on reimbursed business expenses when they are paid in conjunction with a salary sacrifice scheme. The government is also concerned at the growing use of overarching contracts of employment by employment intermediaries such as ‘umbrella companies’, which allow some temporary workers to benefit from tax relief for home-to-work travel expenses that is not generally available to other workers. The government will review these arrangements and publish a discussion document inviting representations from interested parties to inform potential future action.
Simplification of the administration of employee benefits and expenses
As announced at Budget 2014 the government will simplify the administration of employee benefits and expenses. From April 2015 the government will provide a statutory exemption for trivial benefits in kind costing less than £50 . From April 2016, the government will remove the £8,500 threshold below which employees do not pay Income Tax on certain benefits in kind and replace it with new exemptions for carers and for ministers of religion. It will also exempt certain reimbursed expenses and introduce a statutory framework for voluntary payrolling . The new exemption for reimbursed expenses will not be available if used in conjunction with salary sacrifice.
TAX COMPLIANCE AND ADMINISTRATION
HMRC enquiries: closure rules
The government will consult on a proposal to introduce a new power, enabling HMRC to achieve early resolution and closure of one or more aspects of a tax enquiry whilst leaving other aspects open.
Support for mid-sized businesses
HMRC is testing a new approach to supporting mid-sized businesses for launch in 2015. A new mid-size business unit will provide a gateway to the specialist tax help needed by mid-size businesses, including temporary access to a named individual for mid-size businesses transitioning through a key business change with significant tax implications. HMRC is also piloting a new model to support the fastest growing businesses.
Bolstering large business risk working
The government will further increase HMRC resource within the expanded Large Business Directorate to improve tax compliance levels amongst the UK’s largest and riskiest businesses.
Compliance yield target
The government will increase HMRC’s compliance yield target for 2014-15 by £1.5 billion from £24.5 billion to £26 billion.
We are pleased to learn that the OTS proposals to simplify benefits and expenses legislation (that we were consulted on over the summer) have been taken forward and will be implemented.
What should be concerning larger employers is the extra resource HMRC have been provided with to achieve even greater compliance yields than targets that were previously announced .
Larger employers should be taking steps now to ensure they do not fall foul of increased employer compliance activity.
We will of course provide more details of how the OTS proposals will be implemented as soon as they are published.