Some Employee Perks Are Being Lost and It Could Be Costly

Green & Co

Green & Co feature in the South Wales Argus discussing the tax changes for employee perks.

The new tax year has seen a raft of changes, with more legislative reform scheduled to come into effect over the next few years.

From changes in dividends, stamp duty, and national insurance (with a U-turn thrown in for good measure) the way that people are taxed is an ever-evolving landscape. However, it’s not just directors, landlords and the self-employed who have been targeted with new legislation.

Barrie Kenyon, partner at Green & Co Accountants and Tax Advisors said: “From 6th April, the tax and employer national insurance advantages of a salary sacrifice or salary exchange scheme was removed. This means that any employees who have swapped their salary for benefits, which typically include additional holiday days, will now pay the same tax as if they were buying them out of their post-tax income. The Chancellor, Philip Hammond, announced the changes in the autumn statement believing the previous schemes were unfair. From earlier this month, they have started to come into effect.

“However, these changes do not affect those employees who have reduced their salary for pension contributions, childcare purposes such as vouchers, workplace nurseries or directly contracted childcare, the cycle to work scheme and ultra-low emission company cars with co2 emissions of or less than 75g/km.

“The schemes were seen as attractive to both employees and employers, with reduced tax liabilities benefiting both parties.”

Mr Kenyon stressed that there were some caveats that accompany the changes: “If any arrangements which were in place before April 2017 relate to cars with co2 emissions over 75g/km, accommodation or school fees: these arrangements will be protected until April 2021. Also, other arrangements agreed prior to April 2017 that do not fall into the aforementioned categories will be protected until the end of the current tax year in April 2018.”

It is estimated that millions of workers from across the UK will pay more tax due to these changes, with the Treasury believing that these schemes are costing too much in lost tax receipts and national insurance contributions. It is estimated that the reform will cost employers in the UK around £85M this tax year, whilst increasing another £260M by April 2021 when the full changes will come into effect.

If you are worried about any of these forthcoming changes, please contact us at Green & Co for further help and guidance.

Green & Co Accountants and Tax Advisors specialise in business growth and tax minimisation for businesses across Wales and the South West of England.

For proactive advice, contact Green & Co Accountants and Tax Advisors on 01633 871 122, follow @Green_and_Co on Twitter or email barrie@greenandco.com.

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

Barrie Kenyon Features In This Weeks South Wales Argus

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Barrie Kenyon of Green & Co features in this weeks South Wales Argus discussing how some changes in the new tax year will effect employees as well as employers.

The new tax year has seen a raft of changes, with more legislative reform scheduled to come into effect over the next few years.

From changes in dividends, stamp duty, and national insurance (with a U-turn thrown in for good measure) the way that people are taxed is an ever-evolving landscape. However, it’s not just directors, landlords and the self-employed who have been targeted with new legislation.

To read the whole article, please click here.

Some employee perks are losing their tax breaks.

Salary sacrifice.jpg

From 6 April 2017 the tax and employer national insurance advantages of a salary sacrifice or salary exchange will be removed, with the exception of:

  • Pensions
  • Childcare (Vouchers, workplace nurseries or directly contracted childcare)
  • Cycle to work
  • Ultra-low emission cars with co2 emissions of or less than 75g/km.

Any employees who have swapped their salary for benefits, for example, additional holiday days, will now pay the same tax as if they were buying them out of their post-tax income.

If any arrangements which were in place before April 2017 relate to cars with co2 emissions over 75g/km, accommodation or school fees, they will be protected until April 2021. All other arrangements (arranged before April 2017) that are not detailed above will be protected until April 2018.

If you are worried about any of these forthcoming changes, please contact us at Green & Co for further help and guidance.

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

 

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.