Recent Updates to Employment Taxes

A number of employment tax changes are being introduced by the UK government and these come into effect from 6 April 2016.

A number of employment tax changes are being introduced by the UK government and these come into effect from 6 April 2016. Below we summarise a few key areas:

Payrolling of benefits

An optional new procedure for the reporting of taxable benefits provided to employees will come into effect for any employer benefits provided from 6 April 2016.

Under the new process, certain benefits will be reported to HMRC in real time, by a tax adjustment to the payroll, rather than via the annual Form P11D. The existing P11D process will continue in parallel for now, with any companies wishing to use the new service needing to opt in by 5 April 2016.

This will not replace the submission of the end of year filings for the current year (ended 5 April 2016) and certain benefits (employer provided accommodation, low cost loans or vouchers/credit cards) will still need to be reported on a P11D. The P11D(b) employer return will also still need to be submitted.

Please see our information sheet with more details on the new system.

Trivial Benefits in Kind

Also from 6 April 2016, a relaxation of the tax rules means that if a benefit is non-cash / voucher and the value of the benefit does not exceed £50 per employee, per tax year then there should be no reporting requirement for these small benefits, and no tax or National Insurance liabilities for the employee or employer.

There are a few specific restrictions - for instance it does not apply where Salary Sacrifice arrangements are in place and the vouchers cannot be provided in recognition of services provided as part of employment duties. – but broadly this relaxation is welcome one.

Expense reimbursement dispensations & new meal allowance rates

A new approach for business expenses incurred in the course of employment is due to take effect from the same date. The rather old fashioned P11d dispensation requirement will be removed entirely, which means that as long as the expense would ordinarily be allowable, there is no longer any need for these to be reported on Form P11D, providing they are not included in any salary sacrifice arrangement. As part of this, any P11D dispensations agreed before this date cease to have an effect. Again, this is a welcome change from HMRC and further reduces filings with the tax authority.

This exemption also applies to the flat rate payments of meal allowances to employees that travel on business. Subject to the usual qualifying criteria, a meal allowance paid to travelling employees will be exempt from tax and National Insurance so long as it is paid at the following rates:

Minimum journey time Maximum amount of meal allowance
5 hours £5
10 hours £10
15 hours £25

Where an employer had agreed bespoke rates with HMRC post 6 April 2011, then these can continue to be used until the bespoke agreement expires, although HMRC will also need to approve this.

New rates will only be agreed once an employer carries out a sampling exercise to justify the new rates and puts a checking process in place to ensure that only qualifying business journeys are reimbursed and that the employee has actually incurred and paid the amounts.

For more information, contact:

Mark Dent
Tax Manager
+44 (0)20 7430 5960
mdent@fitzandlaw.com

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