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Changes to employment tax proposed in the Finance Bill 2015
16 December 14 | By: Jas Jhooty
Following on from the 2014 Autumn Statement, HMRC have recently published their responses to the Office of Tax Simplification’s (OTS) review of employee benefits and expenses. Relevant stakeholders (including emTax) were invited to attend meetings with HMRC over the summer, to assist them in framing the draft legislation to enact the OTS proposals. HMRC have also published the draft Finance Bill 2015 that contains the proposed legislation on the four consultations as well as on other relevant employment tax matters.
Abolition of the £8,500 threshold for benefits in kind (BiKs)
Legislation will be introduced in Finance Bill 2015 to abolish the £8,500 threshold for BiKs from 6 April 2016. This follows the announcement at Budget 2014 and public consultation over the summer. A new exemption for Ministers of Religion earning less than £8,500 will be introduced to ensure that their BiKs remain exempt from income tax, and exemption from income tax will be introduced on the BiKs for carers who receive board and lodging in the home of the person that they are providing care for. Corresponding disregards will also be introduced for National Insurance Contributions purposes. A summary of responses to the public consultation can be found here.
Simplifying the administration of employee benefits and expenses, including preventing salary sacrifice
Legislation will be introduced in Finance Bill 2015 to exempt from tax certain expenses payments and benefits in kind provided to employees. This follows the announcement at Budget 2014 and public consultation over the summer. The legislation will apply where employees would have been eligible for tax relief if they had incurred and met the cost of the expenses or benefits themselves. This exemption replaces the rules that require employers to either apply to HMRC for an agreement known as a ‘dispensation’ so that they can provide expenses and benefits free of tax and National Insurance contributions, or to report such expenses and benefits to HMRC. However the exemption will not apply where expenses are paid as part of a salary sacrifice arrangement. These changes will have effect from 6 April 2016. A summary of responses to the public consultation can be found here.
Statutory exemption for trivial benefits
Legislation will be introduced in Finance Bill 2015 to provide a statutory exemption from tax, and no liability to National Insurance contributions, for qualifying trivial BiKs costing £50 or less. This follows the announcement at Budget 2014 and public consultation over the summer. Previously employers were required to report such BiKs to HMRC or agree with HMRC that a BiK could be counted as trivial. Employers will no longer be required to report such benefits on either form P11D or via Pay as You Earn Settlement Agreements (PSAs) at the year end. These changes will have effect from 6 April 2015. A summary of responses to the public consultation can be found here.
Real time collection of tax through voluntary payrolling
Legislation will be introduced in Finance Bill 2015 to enable HMRC to set out the statutory framework for voluntary payrolling for employers in the Regulations. This follows the announcement at Budget 2014 and public consultation over the summer. A summary of responses to the public consultation can be found here.
Personal allowance 2015-16 (for people born after 5 April 1938)
As announced at Autumn Statement legislation will be introduced in Finance Bill 2015 to increase the income tax personal allowance for 2015-16 for people born after 5 April 1938 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 limits will increase to stay in line with the higher rate threshold. Rates of income tax will remain at 2014-15 levels in 2015-16.
Blind person’s allowance, married couple’s allowance and income limit for 2015-16
Legislation will be introduced in Finance Bill 2015 to increase blind person’s allowance, the married couple’s allowance available to people born before 6 April 1935 and the income limits by amounts equivalent to Retail Price indexation.
Legislation was introduced in Finance Act 2014 to change the basis of uprating income tax to the Consumer Prices Index. Budget 2011 announced that these allowances and the income limit would continue to be indexed by reference to the Retail Prices Index over the lifetime of this Parliament.
Company car tax rates 2017-18 and 2018-19
As announced at Budget 2013 and Budget 2014, legislation will be introduced in Finance Bill 2015 to increase the appropriate percentages for calculating the benefit charge for cars with a CO2 emissions figure of more than 75 grammes of carbon dioxide per kilometre (gCO2/km) in both 2017-18 and 2018-19. The legislation also sets the differential between the 0-50 and the 51-75 gCO2/km bands in 2017-18 and 2018-19.
The legislation will also increase the appropriate percentage for cars without a CO2 emissions figure and for cars registered before 1 January 1998, in both 2017-18 and 2018-19.
The legislation sets the maximum percentage for diesel cars registered on or after 1 January 1998 for 2015-16.
Van benefit charge for zero emission vans
Legislation will be introduced in Finance Bill 2015 to increase the current van benefit charge of £nil for vans which do not emit CO2 (zero emission vans), beginning in 2015-16. The van benefit charge for zero emission vans will be 20% of the value of the van benefit charge for vans which emit CO2 in 2015-16, 40% in 2016-17, 60% in 2017-18, 80% in 2018-19 and 90% in 2019-20. From 2020-21, there will be a single van benefit charge applying to all vans.
Tax exemption for travel expenses of members of local authorities
As announced at Autumn Statement, and following a Written Ministerial Statement on 22 July 2014, legislation will be introduced in Finance Bill 2015 to exempt from income tax travel expenses paid to councillors by their local authority. The exemption will be limited to the Approved Mileage Allowance Payment (AMAPs) rates where it applies to mileage payments. There will be a corresponding disregard from Class 1 National Insurance contributions (NICs).
Overarching contracts of employment and temporary workers
The Government will review the increasing use of overarching contracts of employment by employment intermediaries such as ‘umbrella companies’. These arrangements enable workers to obtain tax relief for home to work travel that would not ordinarily be available. The Government has published a discussion paper to implement possible action at Budget 2015.
We will be taking a break from our regular weekly employment tax article over the festive period. We will be back in the first week of the New Year. In the meantime we would like to wish all of our readers a very Merry Christmas and prosperous New Year.