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Preview of new employment tax legislation expected in Finance Bill 2015
12 March 15 | By: Jas Jhooty
In advance of next week’s budget, we are previewing the likely changes to employment tax legislation expected in this year’s Finance Bill. On 10 December 2014 the government published the draft Finance Bill 2015. Comments on the draft had to be submitted to HMRC by 4 February. A final version of Finance Bill 2015 will be published later this month, but here is a summary of the latest position relating to employment tax matters as the bill moves from draft to act.
Removal of the £8,500 thresholdThe “higher paid” threshold of £8,500 will be abolished for the purpose of taxing benefits in kind from 6 April 2016, and the form P9D will no longer been needed for 2016/17 onwards. As a result nearly all employees will be taxed in the same way on benefits received. However, two new exemptions are introduced:
- For ministers of religion who earn less than £8,500 p.a – most benefits they receive will remain free of tax and NIC
- For carers who are provided with accommodation in the home of person they care for – this board and lodging benefit will be free of tax and NIC.
The system of applying for a dispensation for certain tax deductible expense not to be reported on a form P11D will be removed from 6 April 2016. The dispensation procedure will be unnecessary as expenses payments and benefits in kind provide to employees which are eligible for a tax deduction, will not be subject to tax and NIC.
A new blanket exemption will also allow employees to be paid a scale rate for certain qualifying expenses, rather than be reimbursed for the expenses they have actually incurred. The scale rates will be set by regulations.
For more information about this proposed measure click here.
Trivial benefitsTrivial non-cash benefits worth no more than £50 per employee will be free of tax and NIC from 6 April 2015. However there are conditions to prevent this rule being abused. The trivial benefit must be provided to more than one person during the year, and it must be impractical to calculate the cost of benefit provide to each person. In addition the provision of the trivial benefit must not:-
- be part of a salary sacrifice arrangement; or
- in recognition of particular services performed by the employees
From 6 April 2016 employers will be able to payroll car, car fuel, medical insurance and subscriptions such as gym membership. This will be optional for employers. They will be able to continue reporting the benefits on the form P11D after the end of the tax year as normal if they wish.
Electric van benefit
Electric and other zero-emissions vans currently attract a zero benefit in kind charge for any private use. From 6 April 2015 this taxable benefit will be calculated at 20% of the benefit for ordinary vans. For 2015/16 the taxable benefit of an electric van will be £630.
The taxable benefit will increase every year as a proportion of the benefit in kind charge for ordinary vans as follows:-
- 2015/16 20% of ordinary van benefit
- 2016/17 40% of ordinary van benefit
- 2017/18 60% of ordinary van benefit
- 2018/19 80% of ordinary van benefit
- 2019/20 90% of ordinary van benefit
- 2020/21 100% of ordinary van benefit
Home to work travelIn a consultation paper entitled Employment Intermediaries: Temporary workers – relief for travel and subsistence expenses HMRC set out options for restricting the availability of tax relief for home-to-work travel of certain temporary workers. The two main options are:
- to specify that where an individual is supplied through a third party (including employment agencies, umbrella company and personal service companies), the workplace of the end client would in all cases be a “permanent workplace”; or
- to stop treating overarching contracts of employment as giving rise to a series of temporary “employments” under a permanent contract for tax purposes.
Option 1 would remove the ability of contractors who work through personal services companies to claim travel expenses from their home offices to their end client. This could make it uneconomic for the contractor to work through a personal service company.
Option 2 would remove the tax advantage of over-arching contracts employment contract used by some employment businesses and umbrella companies to employ temporary workers on multiple separate work placements. Under those contracts the employer’s premises are treated as the permanent base location, this enables individuals to access tax relief on travel and subsistence costs.
Comments for this paper closed on 10 February 2015. It is unclear when or if legislation will be changed to implement the outcome of this consultation.
Travel expenses for local authorities
From 6 April 2015 journeys from the councillor’s home to the most frequently used local authority office, will be treated as business journeys for approved mileage allowance payments (AMAPs). However, if the councillor’s home is more than 20 miles outside of the boundary of the local authority area this treatment will not apply. Draft regulations to apply this rule are out for comment before 16 March 2015.
Construction Industry Scheme
Following a consultation into improving the operation of the construction industry scheme (CIS) changes to the CIS will be introduced by regulation from commencement of these tax years:
- nil CIS returns replaced by voluntary notifications
- joint ventures to be granted gross payment status where one partner who has an interest of 50% or more has gross payment status
- ease the repayment of CIS tax to liquidators where the company is
- online filing of CIS returns to be compulsory
- changes to gross payment status tests
- online verification of subcontractors to be compulsory
We will be in a much clearer position after next week’s first budget of this year, to see how many of the above proposed measures are actually enacted. However as there is an election on the horizon there are likely to be one or two further Finance Bills in 2015 presented to parliament when the new government is formed after the election.