Radical changes to the benefits and expenses rules have been announced. What are they and when will they come into effect?
The current rules for taxing and declaring benefits and expenses have been criticised as over-complicated for years. In 2014 the Office of Tax Simplification took on the task of coming up with a better alternative. The government announced in the 2014 Autumn Statement
that it would go ahead with most of the suggestions.
The £8,500 earnings threshold for lower paid employees below which there are special rules for the taxation of benefits in kind
will be abolished with effect from 6 April 2016.
This means:
- all employees will be taxed on benefits using the rules that currently apply only to directors and employees earning at an annual rate inexcess of £8,500 per year
- the NI treatment will also be aligned so that employers will pay Class 1A contributions on the benefits of all employees
the return Form P9D will be abolished as it won’t be needed.
Also from 6 April 2016 business expenses reimbursed to employees will be exempt from tax and NI. This will only
apply where the employee would be entitled to claim them as tax deductible had they not been reimbursed. Consequently, employers will
not be required to report the expenses on Form P11D. This will be welcome news for many businesses.
- Plus, from 6 April 2016:
- there will be no charge to tax or the need to report on Form P11D a trivial benefit provided to an employee where the cost does not exceed £50 (or £50 per person if provided to several employees at once);
- the benefit does not consist of cash or a credit token (including the use of a credit card)
no salary sacrifice is involved; - and the benefit isn’t linked to any particular service provided by the employee.
The changes apply from 6 April 2016.
Their main effect is to reduce the P11D reporting requirements of expenses from which employees gain no personal benefit, and to exempt benefits in kind worth up to £50.
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