The limelight may be on the radical reforms to stamp responsibility in the Autumn Statement, but waiting in the wings are changes to employee taxation. Some are simplifications, some target tax avoidance and some have wider implications. This is burdensome, especially for employees of small businesses, which are less inclined to have a dispensation. The government has decided to change the system so that one business expenses can be reimbursed to employees without dispensations or promises.
This will avoid needing to jump through these hoops. However, this new rest won’t apply where there’s been “salary sacrifice”. A salary sacrifice happens whenever a person gives up the to future earnings, cash usually, and gets another thing instead, which is free of taxes and/or Countrywide Insurance efforts usually.
So, a day of taxable income rather than getting £10, the employee will abide by an employer that he / she can make tax-free contributions into the employee’s pension, or pay for childcare. This type of salary sacrifice is not striking. However, many employers are paying travel and subsistence expenses to employees instead of higher earnings, applying this salary sacrifice method.
The authorities have said that it “will stop tax alleviation being claimed” on these expenses. It is not yet clear precisely what this means, or how it shall work. There may be more detail in the upcoming Finance Bill. If a company pays for home to work travel, this payment is taxable normally.
However, if a worker is delivered to a new office on a temporary basis, their travel can be paid tax-free. The government is “concerned” about the use of these travel rules by “umbrella companies”. Umbrella companies are a bit like an agency. They employ individuals who work on fixed-term agreements for a range of third-party clients. Some umbrella companies claim that each of the contracts is short-term, and so their workers can get taxes relief on almost all their reimbursed travel costs.
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The government is currently to launch an appointment on the utilization of travel rules by umbrella companies, which will “inform potential future action”. The Autumn Statement anticipates that this will increase the Treasury’s taxes take by £120m in 2016-17, so any changes are likely to take the impact from April next year. There happens to be no tax on benefits in kind for low-paid workers – broadly, those whose total earnings, including benefits, from employment is less than £8,500.
This is to improve from 2016, so that all benefits will be counted for taxes purposes. Care employees and the clergy will have a specific exemption. Many employers will be glad that this complicated wrinkle has been ironed out. One group, who may become more worried are charities who pay accident insurance for volunteers employed in dangerous areas overseas or give a vehicle for them to around get.