Autumn Statement 2014 – Employer Taxes

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Photo Credit: thetaxhaven via Compfight cc

1. Employee benefits and expenses: OTS recommendations to be implemented

The government is to implement the Office of Tax Simplification’s recommendations to simplify the taxation of employee benefits and expenses. In particular, legislation (expected to be in the Finance Bill 2015) will be introduced to implement the following:

i)              A tax exemption for non-taxable expenses reimbursed by an employer. This will replace the current system of reporting the expense to HMRC or seeking a dispensation. The exemption will take effect from 6 April 2016 but will not apply if expenses are paid in conjunction with a salary sacrifice arrangement.

ii)             Abolition of the £8,500 “higher paid” threshold coupled with a new exemption for certain benefits for carers and ministers of religion. These will take effect from 6 April 2016.

iii)            A tax exemption for trivial benefits costing less than £50. This will take effect from 6 April 2015.

iv)           Voluntary payrolling of benefits. This will take effect from 6 April 2016.

2. Overarching contracts of employment and temporary workers

The government is planning to publish a discussion paper shortly on the use of umbrella companies and other employment intermediaries that enable workers to obtain tax relief on home to work travel to which they would otherwise not be entitled. The government has long been concerned that some temporary workers are paid travel expenses free of income tax and NICs by working under an overarching employment contract with the aim of changing a series of permanent workplaces (for which there is no tax relief) into temporary workplaces (for which relief is due). It is likely that the discussion paper will result in legislation to be announced in the 2015 Budget. This is part of an ongoing review of employment status and the use of employment intermediaries.

3. Employment intermediaries returns: penalties

There will be an amendment in the Finance Bill 2015 to correct the legislation underpinning the penalty regime for the late filing of or non-submission of quarterly returns by employment intermediaries. The quarterly returns are required to show details of all workers supplied by the intermediary to an end client to whom payments have been made without deduction of tax under PAYE. The first return, covering the period from 6 April to 5 July 2015 must be submitted by 4 August 2015.

4. Employer NICs to be abolished for young apprentices

The Chancellor announced that, with effect from 6 April 2016, no employers’ national insurance contributions will be payable on earnings below the upper earnings limit paid to apprentices who are under the age of 25.

This measure will further reduce the cost to businesses of employing young people. Employers will no longer pay national insurance contributions for any employees under the age of 21 from April 2015.

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