Personal tax and employment taxes
ICAEW Tax Faculty provides analysis of the announcements relating to personal tax and employment taxes in the Autumn Budget 2017.
The uptake of marriage allowance continues to be poor with only about half of the four million eligible couples having claimed. An anomaly which prevented claims on behalf of deceased spouses and civil partners is to be removed with effect from 29 November 2017. Claims can be backdated for up to four years.
NIC Bill: abolition of class 2 NIC and other changes
The National Insurance Contributions Bill will be introduced in 2018. The measures it will implement will now take effect one year later, from April 2019. These are:
- abolition of class 2 NIC;
- reforms to the NIC treatment of termination payments; and
- changes to the NIC treatment of sporting testimonials.
Draft legislation for the abolition of class 2 NIC and reforms to the NIC treatment of termination payments (see elsewhere for income tax changes) and sporting testimonials was published on 5 December 2016.
Class 4 NICAs previously announced, the government will no longer proceed with an increase to the main rate of class 4 NIC from 9% to 10% in April 2018 and to 11% in April 2019.
Company car benefits charges
For company cars benefit-in-kind rates see the table in Annex C of OOTLAR.
Company car benefit and VED: CO2 emission regime
FB 2017-18 will confirm that CO2 figures compatible with the current New European Driving Cycle (NEDC) test procedure will continue to be used by HMRC for the purposes of collecting company car tax until April 2020. For periods from April 2020, government will legislate in a future Finance Bill to change the system for measuring CO2 emissions to the Worldwide Harmonised Light Vehicle Test Procedure (WLTP). Similar legislation will be introduced in respect of vehicle excise duty (VED).
Company car benefit: diesel supplement
The diesel supplement will be increased from 3% to 4%. The diesel supplement is used to calculate company car tax and car fuel benefit charge where the employer provides the employee with a diesel car that is made available for private use. This will apply to all diesel cars registered on and after 1 January 1998 that do not meet the Real Driving Emissions Step 2 (RDE2) standards. There is no change to the current position that the diesel supplement does not apply to hybrid cars. The change will have effect from 6 April 2018.
Employer-provided electricity for electric or hybrid cars
From April 2018, there will be no benefit-in-kind charge on electricity that employers provide to charge employees’ electric or hybrid vehicles.
Van benefit and fuel benefits
Van benefit charge and the fuel benefit charges for both vans and cars will be increased from 6 April 2018 by the September 2017 RPI, as follows:
- the flat-rate van benefit charge will increase to £3,350 (2017/18: £3,230);
- the multiplier for the car fuel benefit charge will increase to £23,400 (2017/18: £22,600); and
- the flat-rate van fuel benefit charge will increase to £633 (2017/18: £610).
The government will legislate by statutory instrument in December 2017 to ensure the changes can be reflected in tax codes for 2018/19.
Overseas scale rates for accommodation and subsistence
The existing concessionary travel and subsistence overseas scale rates will be placed on a statutory basis on and after 6 April 2019, to provide clarity and certainty. Employers will only be asked to ensure that employees are undertaking qualifying travel.
This follows the call for evidence on the taxation of employee expenses published on 20 March 2017, to which we contributed in ICAEW REP 75/17. The full response to this consultation will be published on 1 December 2017.
Taxation of employee business expenses
Also arising out of HM Treasury’s call for evidence published in March 2017, the following changes will be made:
- Subsistence benchmark scale rates: employers will no longer be required to check receipts when making payments to employees for subsistence using benchmark scale rates. This applies to standard meal allowances paid in respect of qualifying travel and the newly legislated overseas scale rates. Employers will only be asked to ensure that employees are undertaking qualifying travel. The change will have effect from April 2019. Abolition of receipt checking does not apply to amounts agreed under bespoke scale rates or industry wide rates.
- Guidance and claims process for employee expenses: HMRC will work with external stakeholders to improve the guidance on employee expenses, particularly on travel and subsistence and the process for claiming tax relief on non-reimbursed employment expenses.
The government will consult in 2018 on extending the scope of tax relief currently available to employees and the self-employed for work-related training costs.
Employment status consultation
The government will publish a consultation as part of its response to Matthew Taylor’s review of modern working practices published in July 2017, considering options for longer-term reform to make the employment status tests for both employment rights and tax clearer. The government recognises that this is an important and complex issue, and so will work with stakeholders to ensure that any potential changes are considered carefully.
Termination payments: foreign service relief
Employees who are UK resident in the tax year that their employment is terminated will not be eligible for foreign service relief on their termination payments. The existing Statutory Residency Test will be used to determine whether employees are UK resident in the tax year they receive their termination award. Reductions in the case of foreign service are retained for seafarers. The changes will have effect from 6 April 2018 and apply to those who have their employment contract terminated on or after 6 April 2018.
Draft legislation on reforms to the NIC treatment of termination payments was published on 5 December 2016; this will be included in a NIC Bill in 2018 and apply from April 2019.
SAYE schemes and parental leave
Employees on maternity and parental leave will be able to take a pause of up to 12 months from saving into their Save As You Earn employee share scheme, increased from six months currently. HMRC guidance will set out the changes. The change will take effect from 6 April 2018.
Armed forces accommodation allowance
An income tax exemption is being introduced for certain allowances paid to armed forces personnel for renting or maintaining accommodation in the private market. A class 1 NIC disregard will also be introduced through regulations. The change will have effect on and after Royal Assent of FB 2017-18, once regulations have been laid. This is intended to support the Ministry of Defence’s aim to provide a more flexible, attractive and better value-for-money approach to accommodation.
Seafarers’ earnings deduction extended to Royal Fleet Auxiliary
Seafarers are entitled to an income tax deduction, known as the seafarers’ earnings seduction, of their foreign earnings in certain circumstances. The existing extra-statutory treatment of the Royal Fleet Auxiliary will be placed on a statutory basis. The change will have effect on and after Royal Assent of FB 2017-18.
Qualifying care relief
Qualifying care relief (QCR) is a tax simplification covering expenses incurred when providing care that means carers only need to keep simple records. The government will extend the scope of QCR to cover self-funded shared lives care payments, to encourage the use of shared lives care.
Shared lives schemes are designed to support adults with learning disabilities, mental health or other problems that make it harder for them to live on their own. The schemes match an adult who has care needs with an approved shared lives carer. These carers share their family and community life, and give care and support to the adult with care needs.
Reducing student loan overpayments
The government will tackle the problem of graduates overpaying their student loans. The Student Loans Company and HMRC will update their processes by April 2019, in order to share data more frequently and stop payments after a borrower has fully repaid.
NLW and NMW
In line with the recommendations of the independent Low Pay Commission, the national living wage (NLW) for those aged 25 and over will increase from by 4.4% from £7.50 per hour to £7.83 per hour from April 2018.
The national minimum wage (NMW) will increase as follows:
|21 to 24 year olds||18 to 20 year olds||16 and 17 year olds||Apprentices|
|From April 2018||£7.38 per hour
|| £5.90 per hour
|| £4.20 per hour
||£3.70 per hour
All these increases are above the rate of inflation, so are welcome.
Gift aid donor benefit rules
There are currently three monetary thresholds for determining the level of benefit that can be given to donors in consequence of a donation on which gift aid can be claimed. For donations:
- up to £100, the value of the benefit can equate to a total of 25% of the donation;
- between £100 and £1,000, the value of the benefit is capped at £25; and
- over £1,000, the value of the benefit can equate to a total of 5% of the donation, up to a maximum annual benefit value of £2,500.
These will be replaced from April 2019 by two percentage thresholds; thresholds 2 and 3 above will in effect be amalgamated:
- the benefit threshold for the first £100 of the donation will remain at 25% of the amount of the donation; and
- for larger donations charities will be able to offer an additional benefit to donors up to 5% of the donation that exceeds £100 with a maximum annual benefit of £2,500.
A consultation document will be published in spring 2018 to consider whether an individual can claim entrepreneurs’ relief once their holding has fallen below the 5% qualifying level following an issue of new shares to external investors. Retaining the ability to access the relief could encourage an individual to maintain an active role in the management of the business.