The post-Brexit lull is well and truly over with the issue of a plethora of consultations, all of which are significant and all of which should be bedtime reading for employers. Here is just a brief summary of three of them
Following the advisory referendum on the United Kingdom’s continued membership of the European Union, all seemed to go quiet on the government consultation front – just at a time when we were expecting them. This was so that we had the summer to express our views, all in time for the government to respond and consider the views of individuals, stakeholders and employers ahead of Autumn Statement 2016.
But the post-Brexit lull is well and truly over with the issue of a plethora of consultations, all of which are significant and all of which should be bedtime reading for employers. Here is just a brief summary of three of them:
Salary sacrifice and Benefits in Kind
This was released on 10 August and is open until 19 October 2016. This discusses changes to legislation planned for tax year 2017-18, i.e. only seven or so months away.
This was, probably, the one that was the most highly anticipated and the most significant. The subject matter was not a surprise as successive autumn statements and budgets had hinted that changes were on their way. The consultation advises employers where salary sacrifice was intended and where it will remain unchanged in four areas:
1. Employer pension contributions;
2. Employer-provided pension advice (from April 2017);
3. Employer-supported and provided childcare; and
4. Cycle to work schemes.
The proposal is for it to remain in place and unaltered where the employee enters into salary sacrifice for “intangible” benefits such as the exchange of remuneration for additional leave or flexible working.
However, other salary sacrifice arrangements will be limited. While the concept can remain in place, if the sacrifice falls outside of the above, the income tax and employers NICs advantages will be lost. While the item may still be tax exempt in legislation, if the benefit is provided via a contractual salary sacrifice arrangement, it will have to be declared on the P11D and the employer will have to pay Class 1A NICs.
‘Making good’ on benefits
This was released on 9 August and is open until 4 October 2016. It concerns the current time limits that are in place for an employee making good the value of the benefit so that it does not count for P11D reporting. An employer can make good for most benefits in kind; however, commonly, it is used to reduce the benefit to zero for private use of company cars, van benefit, the use of company assets and beneficial loans.
Legislation and guidance is confusing and conflicting regarding the dates by which the employee is required to make good. Sometimes this is clearly “the end of the tax year” while other times it says “within a reasonable time”. Sometimes it says “by 1 June following the end of the tax year”. Other times it is a mixture of all three.
The making good dates is confusing for employers and employees, so the consultation seeks to gauge reaction to implementing common and uniform making good dates.
This was released on 10 August and is open until 5 October 2016. This is all to do with the simplification of the tax treatment on termination payments and, broadly, sets out the following from 2018:
• The £30,000 threshold will stay. There was talk of increasing it, decreasing it or linking it to length of service.
• Employer NICs will be payable on termination payments over £30,000. This mirrors the treatment for income tax where the first £30,000 is exempt with tax payable thereafter.
• All PILONs will be treated as earnings and, therefore, subject to tax and NICs. Payments that are “directly related to the termination of employment” can be paid free of tax (up to £30,000). However, that does not include PILONs, as the payment would have been earnings had it not been that the employment was terminated.
The August 2016 document serves the dual purpose of being a government response to a 2015 consultation followed up by a consultation on draft legislation to implement the above.
Happy reading and digesting. The salary sacrifice one is important, as the government wants the changes from April 2017.