A summary of the Autumn Statement 2016

The Chancellor delivered his Autumn Statement to Parliament on 23 November 2016 and you will find a summary of the changes which may affect you, as an employer.

Salary Sacrifice

The Chancellor intends to remove the income tax and employer’s Class 1A National Insurance contributions (NICs) advantages from salary sacrifice arrangements. In this context, salary sacrifice includes Benefits in Kind (BiKs) with a cash allowance option and flexible benefit packages with a cash option.

However, he will not limit the income tax and Class 1A NICs advantages for salary sacrifice for:

• payments by employers into registered pension schemes and employer provided pensions advice,
• childcare vouchers, workplace nurseries, and directly contracted employer provided childcare,
• bicycles and cyclist safety equipment (including Cycle to Work), and
• Ultra-Low Emission Cars (ULEVs) with emissions of no more than 75g CO2/km, that are in the scope of the car benefit charge.

For all other BiKs provided through salary sacrifice arrangements, including currently tax exempt BiKs (such as mobile phones), the value of the BiK for income tax and Class 1A NICs will be the higher of the current taxable value or the cash foregone. There will not be a Class 1 NICs liability, unless one already exists on the benefit (such as in the case of vouchers).

Employers and employees are still free to use salary sacrifice, but with the tax and Class 1A NICs advantages removed. The new rules will come into effect on 6 April 2017 but there will be transitional arrangements:

Trivial benefits in kind

From 6 April 2016 a new exemption removed liability to income tax for low value benefits in kind (BiKs) also known as ‘trivial BiKs’.

General conditions

To qualify as a ‘trivial BiK’ conditions A-D must be met:

• Condition A – the BiK must not be cash or a cash-voucher;
• Condition B – the BiK must cost £50 or less;
• Condition C – the BiK must not be provided as part of a salary sacrifice or other contractual

 arrangement; and

• Condition D – the BiK must not be provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

There is no limit to the number of trivial BiKs that can be provided to an employee in a tax year where all conditions are met, unless Condition E applies (see below).

Close companies

Condition E applies an annual £300 cap where a trivial BiK (that meets conditions A to D) is provided by an employer that is a close company to an employee who is a:

Director or other office-holder of the close company, or member of the family or household of a director or other office-holder of the close company.

Former employees

Changes have been made to the ‘Employer-Financed Retirement Benefits’ (Excluded Benefits for Tax Purposes) Regulations 2007 (‘the EFRBS Regulations’). This ensures qualifying trivial BiKs provided to former employees, or to members of their family or household, also benefit from the exemption and are subject to the close company cap. The changes to the EFRBS Regulations came into force from 1 December 2016 and have effect from 6 April 2016.

Tax relief for employees

Your employees may be able to claim tax relief if they have to use their own money, and you haven’t reimbursed them, for travel or things that they must buy for their job.

For example:

• repairing or replacing small tools
• cleaning, repairing or replacing specialist clothing, such as a uniform or safety boots
• business mileage, (where an employee uses their own vehicle), or fuel costs, (if using a company car)
• travel and overnight expenses
• professional fees and subscriptions paid to some approved professional organisations.

It’s free and easy for your employees to make a claim through HMRC. They just need to fill in a form P87 ‘Tax relief for expenses of employment’.

What to do when an employee changes address

It is, and always has been, an individual’s responsibility to notify HMRC of a change of address. If an employee informs you of a change of address, please encourage them to tell HMRC by updating their online Personal Tax Account.

In some cases the employee may not be able to do this and you as the employer can pass the information onto HMRC by completing the employee address boxes on your next Full Payment Submission (FPS).

Personal Savings Allowance changes from 6 April 2017

From the tax year beginning 6 April 2017 which will alter the way that (Personal Savings Allowance) PSA calculations will be applied.

These changes will have no impact on your payroll processes.

PSA will continue to be applied, with basic rate taxpayers still eligible for up to £1,000 of savings income tax free, and £500 for higher rate taxpayers.

Update on Tax-Free Childcare

Tax-Free Childcare launches for parents from early 2017 as a new Government scheme to help working families with their childcare costs.

The scheme will allow eligible parents to open online childcare accounts to make payments direct to their registered childcare providers. For every £8 parents pay in to these accounts, the Government will add £2, and the total amount in the account can only be spent on childcare. Parents can receive up to £2,000 in Government support per child, per year, or £4,000 for disabled children.

Are you a childcare provider? As a childcare provider you need to sign up for Tax-Free Childcare to be able to receive payments from parents, via the scheme. You should act now to sign up.