It’s HMRC On The (Mobile) Telephone

Close up of a man using mobile smart phone

Once again we find ourselves in P11D season, that joyous time in the tax calendar where expenses and benefits provided by employers to their employees are dissected for inclusion on the P11D.

Employers will no doubt have the same conversations they have with their accountants each year concerning the chargeability of benefits and expenses and one such conversation will centre around mobile phones.

If an employer provides an employee (or director) with a mobile phone it will only be exempt from tax and national insurance if the employee is provided with only one mobile phone or sim card and the contract is between the employer and the supplier. This can prove an issue for small companies that have transferred from sole trades where the proprietor has kept the contract in their name on becoming a director.

If the employer reimburses anything more than itemised business calls and the contract is between the employee (or director) and the supplier then a benefit in kind will be assessed on both employee and employer and tax and NIC will be due.

The expenses and benefits system is currently undergoing a re-haul and if you’re unsure of any existing or new procedures it is advised that you speak to your tax adviser.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Benefits To Payrolling Benefits In Kind

ID-100105797From April 2016, the government is allowing employers to payroll employee benefits in kind. Payrolling is where the employer includes a notional value for benefits in kind as taxable pay in the payroll cycle, meaning that the income tax is collected in real time.

Currently, tax for employee benefits in kind is collected through a tax code adjustment meaning that it is always reliant on HMRC being informed promptly and can result in an under or overpayment of tax.

One of the biggest benefits of the new system is that there will no longer be a need to submit forms P11D or P46 (Car) after the end of the tax year. The exceptions to this are for living accommodation, beneficial loans and credit vouchers and tokens.

A big benefit for the employee is that any changes can be reported in real time, meaning they should not ordinarily over or under pay tax on their benefits in kind.

Employers seeking to register for the service must do so online with the payroll registration service, which is accessed through the government gateway and can be found HERE.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

Is It Time To Ditch Your Fuel Charge Benefit?

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The car benefit charge multiplier increased from £21,700 to £22,100 on 6 April 2015 and, with effect from 6 April 2016, will increase again in line with the retail prices index. The equivalent benefit for vans is £594 and, again, will increase in line with the retail prices index.

This means, for example, if your company car has CO2 emissions between 120-124 you will incur a fuel benefit charge of £3,990 for a petrol car (£22,100 x 19%) or £4,862 for a diesel car (£22,100 X 22%)

For a higher rate taxpayer the cost in terms of extra tax is either £1,596 or £1,945 respectively. As the multiplier is to increase, so will the benefit. The higher the Co2 emissions for the car, the higher the benefit, so for a car with emissions between 140-144 the benefit increases to £5,083 and £5,746, or extra higher rate tax of £2,033 and £2,298.

If the amount you would spend on private fuel is below the tax you pay on the benefit then it is time to have a rethink on how you claim the fuel you use for business purposes and so avoid any benefit.

Green & Co can offer advice to ensure that the most tax advantageous method is implemented. Please contact us for further information.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of Michelle Meiklejohn at FreeDigitalPhotos.net

Trivial Benefits – A New Exemption

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Previously, there was no minimum cost threshold below which benefits were disregarded for tax purposes. This changed on 6 April 2015. From this date ‘trivial’ benefits are disregarded and no longer have to be reported on the dreaded PIID (Return of expenses payments and benefits).

So what is a trivial benefit?

The conditions for the benefit to be regarded as trivial, and therefore exempt, are:

  • The benefit must not be cash or a voucher exchangeable for cash.
  • It can’t be used in conjunction with relevant salary sacrifice arrangements or any other contractual arrangement.
  • It must not be provided in recognition of particular services performed or anticipated in the course of the employment.

The cost of the trivial benefit must not exceed £50.

A trivial benefit qualifies for exemption if it is made in recognition of a life event such as an employee’s birthday, wedding or new baby. This means that an Employer could give employees high street retail vouchers of up to £50 as a birthday or Christmas present and qualify for the exemption under the new rules.

For further information contact Green & Co.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

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Because They’re Worth It!

Just take a few moments to consider your work force…(No, I am not suggesting replacing Cheryl Cole…) Do you value your employees? Do you wish to retain staff? If so, have you considered a flexible benefits package? Such packages improve staff motivation just by the offering of them, and show that you are a caring employer.

The employee is offered the choice of receiving benefits. Obviously, the aim is to provide, as far as is possible, tax efficient benefits which reduce the employee’s liability. The package could be done under a salary sacrifice scheme whereby the employee forgoes a portion of his/her salary in order to obtain the benefits.

There are certain benefits which can be provided tax-free and therefore save your employees money, e.g. pension contributions, death in service life cover, extra holidays, cheap loans under a certain limit, etc.

Other benefits which may be taxable are still cheaper if provided by an employer because of discounts which are afforded to employers but not individuals, e.g. Private Medical Insurance, retail vouchers (major retailers offer a 5% discount).

One way of providing a benefits package is known as the cafeteria system. As the employer, you would have a fixed cost. The employee is allowed to choose from the “menu” those benefits for which he/she wishes to sacrifice part of his/her salary. The package can be reviewed/changed annually.

The perception and value of such packages is not to be taken lightly. Even if the employee decides the cash is still better, the fact that you, the employer, have given him/her the choice makes the employee feel valued and “worth it.”

Finally, since it is Christmas and the season of good cheer, have you considered what HMRC call trivial benefits such as seasonal gifts to employees, e.g. a turkey, box of chocolates, even a bottle of wine or two – but definitely not a case! (Ah well, Scrooge has to crop up somewhere at this time of year!)

If you require any further information please do not hesitate to give us a call. In the meantime, may we wish you a very merry Christmas and a prosperous New Year.

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

 

Part time employees – the full time benefits

During the past few years employing part-time workers has become more popular. With the governments proposed plans for flexible parental leave part-time employees may be seen as an easy way to cover the possibility of parents interchanging periods of leave with their partners i.e. mum taking leave, then dad and then mum again which could otherwise be an administrative headache to coordinate and cover for.

But what are the other advantages of having part-time employees in your team?

  • It is possible to save money by hiring part-time staff, as each employee’s national insurance (NI) allowance means that employer’s NI doesn’t kick-in until you pay your employee £148 per week, and at 13.8%, this could be a considerable cost saving.
  • Part time staff can bring flexibility to your business. During peak periods, it could be possible to increase their hours so that more work can be completed. This would also mean more staff available for holiday, parental or sick cover.
  • Part time employees may enable you to have a greater diversity of skills. For example, if you could afford one full-time employee you could decide to hire a part-time bookkeeper and a part-time administrator for example. Rather than limiting yourself to just one type of employee that you require you get both, and as your business grows you have the option of increasing their hours as required.
  • It may also mean you can retain valued employees, for instance after they have been on maternity leave, and have a wider pool from which to recruit from. There are many well qualified people out there who would be prepared to work, and to work hard, if they could only work on a flexible part-time basis.

If you plan and consider carefully which jobs in your organisation may be appropriate for either a part-time employee, or a job share then you may find that part-time staff can bring a huge benefit to your business.

Will you lose your child benefit?

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Child benefit will be withdrawn for high income taxpayers from January 2013.

The threshold for this tax change is £50,000 and will be tapered on income from this figure up to £60,000 when no child benefit will be due.

The change has been the subject of much controversy. Take two families both with two children. Family A have only one earner whose income is £66,000. As this exceeds the limit of £60,000 no child benefit is due. Family B have both parents working with one parent earning £45,000 and the other £21,000. Although their combined income exceeds the limit they are still entitled to child benefit. This is because their incomes are not aggregated for child benefit purposes and as neither earns more than the limit on their own, full benefit is due.

The Government expects this change to affect 1.2m families. Are you one of them?

Is there anything you can do to ensure the benefit is retained.

There are some planning points that can be considered.

It would be beneficial to ensure that both spouses earn less than £50,000. Pension contributions could be made to reduce the level of income.

It may be possible to shift income by way of dividends.

Consider gift aid donations.

Should you require any further information please contact barbara@greenandco.com

Please note: This article is a commentary on general principles and should not be interpreted as advice for your specific situation.

Image courtesy of jomphong at FreeDigitalPhotos.net