Pre-Budget Report 2009 commentaries - Employers tax
"The commentaries below are written in general terms. Details can also be found in our downloadable Pre-Budget Report brochure. You are strongly recommended to seek specific advice before taking any action based on the information given, both in the commentaries and in the publication."
Company car tax
From 6 April 2012 the graduated table of company car tax bands used to determine the appropriate percentage to be applied to the car’s list price will be amended so that it starts at 10% (for cars with CO2 emissions of 99 g/km or less) and all the other CO2 emissions thresholds will move down by 5g/km.
Comment
These changes are being flagged well in advance as has been the Government’s practice in this regard over recent years. The reduction in the emissions thresholds is the sixth such move since the current regime for taxing company cars was introduced in 2003/04. The change to introduce the 10% band will mean that Qualifying Low Emissions Cars will no longer exist as a separate category.
Salary Sacrifice and Workplace Canteens
The tax exempt status of free or subsidised meals provided at the workplace that are available to all is to be removed from 6 April 2011 in circumstances where the benefit is obtained by the employer’s employees through the sacrifice of salary or other benefits.
Comment
This is a targeted measure to tackle an abuse that is perceived by HMRC. Employers who provide free or subsidised meals to all their staff at the workplace as a standard benefit will not be affected by the change. But those who offer the facility under either a salary sacrifice arrangement or flexible benefits package, such that employees must give up taxable pay or another benefit in kind in order to take it up, are to be penalised so that the tax and Class 1 NIC advantages that accrue from the arrangements are eliminated.
It is difficult to see why HMRC has stopped at subsidised workplace meals as these sorts of salary sacrifice/flexible benefit arrangements create similar tax and NIC savings where a variety of other tax advantaged benefits are used. Possibly there is more to come.
Company Car & Van Tax – Electric Cars
From 6 April 2010 for five years employees and directors who are provided with a company car for their private use that is propelled solely by electricity will have no taxable benefit. Those provided with company vans available for unlimited private use that are propelled solely by electricity will have their taxable benefit reduced from the current £3,000 to zero, again from 6 April 2010 for five years.
Comment
It is difficult to imagine that many employees and directors will be able to benefit immediately from this measure, but possibly towards the end of the five years technology and availability of such cars and vans will have improved sufficiently to make this more than a mere gesture. It is worth noting that both the employee and the employer will benefit from this measure as there will be no Class 1A NIC liability arising from these benefits either.
Company Cars and Vans – Private Fuel Benefit
The amount of the taxable benefit of private fuel provided for a company car is to be increased from 6 April 2010. The taxable benefit is derived by applying the appropriate percentage according to the car’s CO2 emissions rating to a fixed amount. That amount is currently £16,900 and it will increase to £18,000.
The taxable benefit for private fuel provided to a company van user will also increase from £500 to £550 from 6 April 2010.
Comment
The current values for these two benefits have been in place since 6 April 2007 for vans and 2008 for cars. These increases should therefore come as no surprise.
PAYE Pooling
Draft PAYE regulations for consultation in early 2010 with the aim to allow large connected employers to combine PAYE references
Comment
Likely to be welcomed by large employers as it should reduce employer payroll compliance
Travel Schemes
There is a concern that employees give up salary for tax and NI free travel costs which are available for travel to temporary workplace. Changes are proposed to National Minimum Wage Regulations aimed at stopping this with a consultation in New Year.
Comment
Such arrangements are in place not just for employees at or close to minimum wage. It will be interesting to see if the proposed changes will be extended to include such employees.