Following a review of employee benefits and expenses carried out by the Office of Tax Simplification (OTS) in January 2014 and announced during March’s Budget, the government launched four new consultations in a bid to simplify the administration of benefits-in-kind and expenses. The documents published last month by HMRC intend to introduce legislation in next year’s Finance Bill.
The four consultations will look at:
As per current rule, an employer must report taxable benefits on Form P11d for all employees and company directors that earn £8,500 or more per annum. The OTS has recommend to abolish the £8,500 threshold which will make all employees liable to tax on benefits received and employers having to pay additional Class 1A NIC. Another objective of this consultation would be to introduce steps to mitigate the impact on vulnerable groups that will be affected by the change.
Suggested by the OTS, the objective of this consultation is to introduce a statutory exemption for benefits-in-kind that are trivial in nature, for instance, gifts like a box of chocolates given at Christmas or a bouquet of flowers presented for a personal achievement. If all goes as per OTS’ suggestion, employers will neither have to report such benefits nor pay Class 1A NIC on such trivial gifts.
The government will however need to define ‘trivial’ in the legislation so that a new statutory exemption can be introduced.
2. Registering with HMRC can get ‘taxing’
If this is your first year filing a return, you will need to register with HMRC for online services. The process can get ‘taxing’ as it takes almost 2 weeks for HMRC to generate a UTR code once you register. If you are start now you can get everything sorted but if you wait until the January rush it might take longer. The registration process should become simple once HMRC rolls out online tax accounts, but for now you have to rely on postal communication.
The objective of this consultation is to enable employers to choose whether they want to report tax on benefits through the payroll or through form P11D. This according to the government will offer considerable administrative savings for some employers.
Coming from another OTS proposal, the objective of this consultation is to remove the need to apply for dispensations and replace it with a system through which employers can decide if the expenses they pay are subject to tax relief or not. The government feels that an exemption would be simpler and easier for employers to use than the current system.
- Abolition of the £8,500 threshold for benefits-in-kind
- Introduction of a statutory definition of a trivial benefit in kind
- Voluntary payrolling of benefits
- Replacing the current system of dispensations
Speaking about the consultations, Exchequer secretary to the Treasury, David Gauke said, ‘The consultations will deliver real improvements for businesses and individuals and their experience of the tax system. We want to make sure we get the structure and detail absolutely right and each consultation will allow us to engage with and learn from those who will be directly affected,’
The government is seeking opinion from anyone with an interest in simplifying the tax treatment of employee benefits and expenses and the consultations are open till 9th September.