June 2016 - Update

We would like to take this opportunity to update you on June activity within Aaron Associates. Our tax consultancy offer a range of taxation services.
  

Travel and Subsistence Legislation Update

The long awaited travel and subsistence legislation has finally been published in full in the Finance Bill 2016. Major legislative changes have come into force with effect, from 6 April 2016, which dramatically affects the ability of employed workers to claim travel and subsistence where there is the involvement of an employment intermediary. Typically the employment intermediary situation involves an umbrella employer and an agency that contracts with end clients. For many years the employment intermediary market has operated around the ability of workers to claim expenses for travel and subsistence involving temporary workplaces. The new legislation greatly restricts prospects for claiming travel and subsistence expenses going forward. Worryingly the changes can also affect individuals operating through their personal service companies.

Red tape for mortgage applications cut

In a tightening of security (as called for by the Financial Conduct Authority), HMRC has announced that it will no longer be sending copies of the SA302 (tax calculation summary) by fax. This is often requested for mortgage applications

Many lenders should now accept:

  • The tax year overview confirming the tax due on the return submitted.

Tax paid should be cross refereed to the Tax Calculation, as printed from agent view on HMRC’s system.

  • a breakdown of income as in the tax calculation for the tax years end.

BENEFITS IN KIND

Trivial benefits - what’s the latest?

A new statutory exemption for very small benefits provided to employees is now available to simplify your clients’ reporting.

NEW EXEMPTION

From 6 April 2016 there is a new exemption covering trivial benefits provided to employees. It was assumed this would be a straightforward measure; however, the new legislation will form part of the Finance Act 2016, which is expected to receive Royal Assent in July 2016.

BASIC PREMISE

At its most basic level, the exemption is indeed simple. It provides that gifts to employees, or their family or household members by, or on behalf of, their employer, are not taxable benefits so long as:

  • the cost of the benefit is no more than £50 per gift
  • the benefit is not cash or a cash voucher (one which can be exchanged for cash)
  • the benefit is not a contractual entitlement
  • it is not part of a salary sacrifice arrangement
  • it is not in recognition of particular services provided by the employee in the course of their work, or in anticipation of such services.

CLOSE COMPANY RESTRICTIONS

Special anti-avoidance rules apply to directors and other office holders of close companies and to any individuals who are members of their family or household. A close company is one under the control of five or fewer participators. The trivial benefits exemption is still available for such companies; however, the additional rules have the following effects:

  • Imposing a maximum annual limit to the value of £50 benefits, given or allocated to such employees. This is called the “available exempt amount” and is £300 for 2016/17
  • allocating the value of trivial benefits provided by a close company to members of a director or office holder’s family or household (who are not themselves employees) to the director; therefore counting towards their £300 limit
  • imposing the restrictions to former employees who were directors or other office holders (and to employees who were members of their family or household).

When the £300 limit is exceeded, the full amount of any trivial benefit which takes the employee over the limit is taxable, but that benefit does not then count towards the limit for future benefits.

P11D deadline approaching
The forms P11D, and where appropriate P9D, which report details of expenses and benefits provided to employees and directors for the year ended 5 April 2016, are due for submission to HMRC by 6 July 2016.

Employees pay tax on benefits provided as shown on the P11D, either via a PAYE coding notice adjustment or through the self assessment system. In addition, the employer has to pay Class 1A National Insurance Contributions at 13.8% on the provision of most benefits. The calculation of this liability is detailed on the P11D(b) form. The deadline for payment of the Class 1A NIC is 19th July (22nd for cleared electronic payment).

HMRC produce an expenses and benefits toolkit. The toolkit consists of a checklist which may be used by advisers or employers to check they are completing the forms correctly.

If you would like any help with the completion of the forms or the calculation of the associated Class 1A NIC please get in touch.

To find out more please do not hesitate to contact us.