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The three benefits consultations that become one

By Ian Holloway, head of legislation and compliance at Cintra HR & Payroll Services

It is a fact that employers can choose to remunerate their employees in a range of different ways but the tax system treats these different forms of remuneration inconsistently.

Autumn Statement 2016 announced that the government was continuing to look at the taxation of different kinds of remuneration. Further, it said that they were considering how the tax system could be made fairer and more coherent, including by looking at the taxation of benefits in kind and employee expenses.

Fast forward to the Spring Budget in March 2017 and the (expected) launch of three documents on 20 March 2017 that could lead to some reforms of the way in which we treat Benefits in Kind. On no – three became one as the ones on a review of accommodation benefit and the general taxation of benefits have been “delayed”. No explanation has been given for the delay, though perhaps the government’s sudden backtracking on National Insurance and the self-employed has had an impact internally as well.

So, we have just one, and this is not even a proper consultation.

Employee expenses
This is a “call for evidence” that is looking to understand the use of the income tax relief for employees’ expenses, including those that are not reimbursed by their employer. This is in recognition of the fact there has been a 25% increase in claims between 2009-10 and 2014-15 and Government is not sure why. Note that the treatment of expenses for the self-employed are not in scope.

A call for evidence is just an opportunity for employers and employees to outline what tax reliefs are used and where these reflect changing working practices. The government says that it has no plans to remove the relief on employee expenses. It just wants to ensure that they are “effective”. However, the mere fact that it wants to understand them and why their use affects the amount of income tax revenue to the Exchequer suggests that reforms are on the way. So, I think it would be fair to say that the concept of tax relief on expenses will stay but the actual reliefs will probably change.

Such a document is often followed by a consultation document in the future. Therefore, representations to by 12 June 2017 need to be thorough and reflect current and anticipated future expense practices.

Posted on 30th March 2017 by Jerome Smail



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