EMPLOYMENT TAXATION

Company Car Tax Rates 2016/17

The following changes to company car taxation will apply for 2016/17:

  • the appropriate percentage for each band of CO2 emissions will be increased by 2%, but there will be no change to the maximum appropriate percentage;
  • for cars without CO2 emissions the appropriate percentage will be 16% for cars with 1,400cc or less and 27% for cars with 1,401 – 2,000cc;
  • the 3% diesel supplement will not apply;
  • for cars registered before 1 January 1998, the appropriate percentage will be 16% for cars with 1,400cc or less, 27% for cars with 1,401 – 2,000cc and 37% for cars with 2,001cc or more.

Company Cars and Vans: Repeal of Relief from Potential Double Taxation

The relief from potential double taxation in ITEPA 2003, s 114(3) is to be repealed from 6 April 2014 as it is considered to constitute a threat to the Exchequer and also to be redundant given that there are other sections preventing double taxation. The subsection disapplies the benefit rules where the provision of a company car or van constitutes earnings from employment under any other provision.

Payments for Private Use of a Company Car or Van

Amendments, effective from 6 April 2014, will clarify that if a benefit is to be reduced by payments required by the employer as a contribution for private use of a car or van such payments must be paid within the year in which private use was undertaken.

Employment Intermediaries

Legislation will be introduced with effect from 6 April 2014 to prevent onshore employment intermediaries being used to avoid employment taxes and obligations by disguising employment as self-employment.

Legislation will be introduced in Finance Act 2014 to ensure that from 6 April 2014 the correct amount of tax and National Insurance contributions is paid when UK and UK Continental Shelf workers are employed by offshore companies or engaged by or through offshore employment intermediaries. The measure also introduces a record keeping and return requirement for intermediaries placing workers with end clients but not deducting income tax and NICs at source.

Share Incentive Plans and Save As You Earn (SAYE) Limits

With effect from 6 April 2014, the following Share Incentive Plan investment limits will increase:

  • the maximum value of shares that can be awarded annually to an employee will increase from £3,000 to £3,600; and
  • the maximum value of shares an employee can purchase annually will increase from £1,500 to £1,800 (subject to an overriding limit of 10% of an employee’s salary for the year).

The maximum ratio of matching shares to partnership shares that can be awarded will remain at 2 to 1.

At the same time, the maximum monthly amount that an employee can contribute to SAYE savings arrangements will increase from £250 to £500.

Employee Share Schemes: Office of Tax Simplification Recommendations

Recommendations of the Office of Tax Simplification in relation to employee share schemes are to be implemented. These introduce self-certification and new ‘purpose tests’ for Share Incentive Plans, Save As You Earn Option Schemes and Company Share Option Plans, together with new online filing arrangements for employment-related securities. There will be new rules relating to HMRC compliance, penalty and assessment powers, plus new information requirements and appeal rights. There are also several minor technical modifications. The changes will come into effect from 6 April 2014.

Unapproved Employee Share Schemes: Office of Tax Simplification Recommendations

A number of simplifications will be introduced for unapproved share schemes:

  • a closer alignment of the tax and National Insurance treatment of employment-related securities (ERS) in relation to internationally-mobile employees with rules applying to other types of employment income, and to allow corporation tax relief in a range of circumstances (to apply from 6 April 2015);
  • a new income tax roll-over relief for exchanges of restricted, nil-paid or partly-paid ERS, together with a simplification of the tax treatment of nil-paid and partly-paid ERS and the discharge of notional loans (to apply from Royal Assent to Finance Act 2014);
  • an extension to the circumstances in which corporation tax relief is available for employee share acquisitions (to apply from Royal Assent);
  • an extension to the deadline for an employee making good PAYE tax paid by an employer on a notional payment (to apply from 6 April 2014);
  • a simplification of the valuation rules for listed company shares (to apply from Royal Assent).

The opportunity is also taken to correct an anomaly in relation to employer contributions to overseas pension schemes and to provide other minor and technical updates.

Tax Incentives for Employee Ownership Trusts

New incentives are introduced for indirect employee ownership of trading companies (or parent companies of a trading group):

  • relief from capital gains tax for disposals of shares to a new kind of trust which benefits all employees (applying from 6 April 2014);
  • an exemption from income tax for bonuses paid by qualifying indirectly employee-owned companies provided they are paid to all employees on equal terms and subject to a cap of £3,600 per employee, together with corresponding corporation tax relief (applying from 1 October 2014);
  • exemption from inheritance tax for transfers of shares and other assets into such a trust (applying from 6 April 2014).

Tax Exemption for Employer Expenditure on Recommended Medical Treatment

From a date to be set out in a Treasury Order, legislation will exempt from income tax any benefit in kind or payment of earnings, up to an annual cap of £500 per employee, when an employer meets the cost of ‘recommended’ medical treatment. Treatment is recommended where it is provided in accordance with a recommendation from an occupational health service in order to help an employee return to work after a period of absence due to ill-health or injury. It is proposed to apply where the employee has been unfit for work for a minimum number of days. There will be a corresponding National Insurance contributions disregard introduced in regulations after Royal Assent to Finance Act 2014.

Artificial Use of Dual Contracts by Non-domiciles

Certain income which currently constitutes general earnings from an overseas employment, income from overseas employment-related securities or overseas income provided through third parties which is subject to the remittance basis will in future be taxed on the arising basis.

This will apply to income associated with an overseas employment where:

  • the individual has both UK and overseas employment with the same or associated employers;
  • the UK and overseas employments are ‘related’ to each other; and
  • the foreign tax rate applying is less than 65% of the UK additional rate of tax (which is currently 45%).

This will not apply to income that falls within the three-year period for Overseas Workday Relief.

The measure will not apply to nominal directorships (owning or controlling less than 5% of ordinary share capital) nor to employments held for legal or regulatory reasons.

This measure will apply to income arising from 6 April 2014, but not if such income relates to duties performed before that date.