On 11 June 2018, the Financial Secretary to the Treasury, Mel Stride, announced the UK Government’s intention to publish draft clauses on 6 July 2018 for the Finance Bill 2018/19. Together with this draft legislation, this was accompanied by explanatory notes, Tax Information and Impact Notes (TIINs), responses to consultations and other supporting documents.
See Gov.UK for the legislation and explanatory notes, however, here is a rundown on the ones that are appropriate for the payroll profession:
Clause 1 is mainly corrections to ‘oversights’ in the original OpRA legislation in Finance Act 2017.
Where a car or van is provided to an employee via an OpRA, the amount foregone by the employee in respect of the benefit is compared to the modified cash equivalent with the greater being reported on the P11D. However:
- No provision was made to ensure the calculation of the amount foregone for a taxable car or van should be the total amount foregone, including any connected costs connected with the car or van, for example the cost of insurance or maintenance. This was the original intention
- No provision was made for the proration of capital contributions where the car is available for a part year. This led to the anomaly that a car was available for a part-year but the full year’s capital contributions could be offset
Rather cheekily, the Explanatory Notes say that the technical consultation in December 2016 before the legislation was introduced in April 2017 failed to spot these anomalies. However, HM Treasury and HMRC were made aware after the legislation was introduced and are seeking to correct at the earliest opportunity by amending the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) from April 2019.
I challenge anyone to have spotted this amid the complicated legislation that was / is OpRA!
Currently, where an employer provides battery charging facilities (including electricity) for a vehicle which is not a taxable car or van, the employee is in receipt of a benefit in kind which is liable to Income Tax and Class 1A NICs. Where the provision is made to a taxable car or van, there is an exemption.
The UK Government announced at Autumn Budget 2017 that they would remove this anomaly, supporting Air Quality and Climate Change initiatives by incentivising the take-up of all-electric and plug-in hybrid vehicles.
With effect from 6 April 2018, Clause 2 inserts a new exemption into Chapter 3 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA). Section 237A ‘Vehicle-battery charging’ will remove any tax or NICs liability where facilities are provided by the employer that allow an employee to charge all-electric and plug-in hybrid vehicles at or near the workplace. The word facilities includes the provision of electricity.
Clause 3 introduces three revisions to the tax treatment of emergency vehicles.
Where a car or van is provided that is available for private use it is typically subject to a benefit charge. This does not apply if the car / van is unsuitable for private use, a definition that extends to vehicles with fixed flashing blue lights. Where private use is extensive, the vehicle may be subject to taxation under the ‘assets made available’, akin with company flats and yachts.
However, the assets legislation was changed in Finance Act 2017. When this was issued in draft in December 2016, no comments were made that this would bring more emergency vehicles with extensive private use into the assets legislation. As a result, some people that were previously exempt for a benefit calculation were now exposed to it.
Therefore, there are three revisions to the use of emergency vehicles:
- Extending to the current ‘on-call’ exemption to allow for ordinary commuting in an emergency vehicle when not on-call
- Provisions to ignore fuel as an ‘additional expense’ in working out the tax charge when certain conditions apply, and
- Inserting transitional arrangements for the taxation of emergency vehicles for the period 06 April 2017 to 05 April 2020
The reason for the transitional provisions is that the amended 2017 assets legislation will continue to run in the background. However, people who make extensive private use of an emergency vehicle will have up until 05 April 2020 to ‘consider’ the amount of private use during this period.
The UK Government published a ‘call for evidence’ in March 2017 to better understand the use of the income tax relief for employees’ business expenses, including those not reimbursed by their employer.
At Autumn Budget 2017, a responses document was published detailing two announcements:
- From April 2019, employers will no longer be required to check receipts when reimbursing employees for subsistence using benchmark scale rates, as detailed in the Income Tax (Approved Expenses) Regulations
- Also from April 2019, the existing concessionary accommodation and subsistence overseas scale rates will be placed on a statutory basis, providing greater certainty for businesses
Courtesy of Clause 4, Finance Bill 2019, when enacted, will updated the relevant parts in the Income Tax (Earnings and Pensions) Act 2003 (ITEPA), section 289A with effect from tax year 2019/20.
When an employer provides for death benefits through a life assurance policy or provides retirement benefits through a Qualifying Recognised Overseas Pension Scheme (QROPS), the employee will usually name a beneficiary to receive any payment due upon their death, and may be able to name a beneficiary to receive their retirement benefit. Premiums paid into these schemes by the employer are currently only tax-exempt if the beneficiary of the employee’s death or retirement benefit is the employee, a member of the employee’s family, or a member their household.
If the beneficiary is not a member of the employee’s family or household, the premiums paid by the employer are treated as a taxable benefit in kind. Autumn Budget 2017 announced that this would be amended, ensuring the tax system ‘remains relevant and fair’ with equal tax treatment regardless of the beneficiary’s relationship to the employee.
Clause 5 will amend Chapter 9 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) and extend the current exemption to include any individual or registered charity as beneficiary. This is with effect from tax year 2019/20.
- Clause 1 (OpRA changes) from 2019/20
- Clause 2 (charging electric vehicles at work) from 2018/19
- Clause 3 (emergency vehicles) from 2017/18 to 05 April 2020
- Clause 4 (employee expenses) from 2019/20
- Clause 5 (employer contributions to life assurance and QROPS) from 2019/20