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Employment Tax – Updates

Welcome to our Employment Tax Updates page, where you can find the latest news and information relating to Employment Tax matters.

For past issues, please browse our archive:

13 September 2013

Office of Tax Simplification (OTS) interim report on employee benefits and expenses

The OTS produced its interim report in August, setting out a wide range of fundamental concerns as well as lots of ‘quick wins’ to simplify the rules. Many of the areas highlighted will be familiar to those who have to deal with the areas covered on a regular basis, such as termination payments, travel rules, and differences between tax and NIC.

A copy of our alert providing details can be found here.

Whilst fundamental changes are unlikely in the short term, it is expected that the final recommendations will be produced in time for some changes to be announced in the 2014 Budget.

Real Time Information (RTI)

All employers should be operating under RTI by October. It is clear from ongoing HMRC updates, and the results of our client survey, that there are continuing teething problems. We have highlighted some of the key issues below.

  • Reconciliation problems – HMRC has publicly acknowledged that some PAYE schemes are having difficulty reconciling payments to HMRC records, and has set up a team to investigate this. Problems appear to arise from a wide range of circumstances. Although HMRC is taking a “light touch” approach on RTI return penalties until April 2014, current year discrepancies in payments could still lead to underpayment penalties. Employers should ensure that any issues which are flagged are carefully documented and there is close liaison with HMRC.
  • Software issues – there are still some remaining problems with payroll software which has not been able to address all aspects of RTI. For example, some employers wishing to take credit for foreign taxes against PAYE due have been unable to do so through their RTI submissions. HMRC are logging these cases as they become aware of them and have an agreed protocol in place.

HMRC has now initiated its own survey, and interested employers can access it here.

Employment status case final at Upper Tribunal

The case Weight Watchers (UK) Ltd & Others v HMRC is now final at the Upper Tribunal. We reported on this case previously and the details can be found here.

The class leaders were found to be employees, and important principles can be gleaned in relation to substitution and control, two of the key factors in assessing whether an individual is employed or self-employed.

Auto-enrolment – low opt-out rates

Initial statistics on the number of workers who have opted out of pensions auto-enrolment show a low rate of only around 9%. This is, however, for the initial period when the largest employers are required to auto-enrol, and rates may be higher for smaller employers.

We are aware that many employers are struggling with various aspects of compliance with the new rules, including the rules relating to business acquisitions and mergers, the definition of ‘worker’, and the registration process deadline. The Pensions Regulator has opened over 100 investigations into non-compliance, so employers need to be vigilant in meeting their obligations.

Childcare – changes proposed affecting employers

The government has published proposals to fundamentally overhaul the support given to parents and carers for childcare.

Currently many employers provide support to their employees with childcare vouchers, typically via salary sacrifice. Often these will be built in to a flexible benefits scheme. The proposals published recently would allow existing employees covered by these vouchers to continue to receive the benefits, but new employees would not benefit from the current tax/NIC exemptions. The government’s preferred option in future is that parents open online voucher accounts which are funded directly by government. Employers are likely to need to review their benefit provision and carefully consider the structure of existing schemes, which could act as a disincentive to employees moving jobs.

The new provisions are not expected to operate until a phased introduction in 2015.

Car benefits – HMRC loses Tribunal case

HMRC has lost a case at the First-Tier Tribunal involving provision of cars under ‘market-value’ leases to employees, where HMRC argued that a car benefit should be charged.

In Apollo Fuels Ltd & Others v HMRC, the Tribunal found that the employees had proprietary rights over the vehicles, which meant that the car benefit charge did not apply. In addition, since market value rentals were charged there could be no “benefit”. There were also findings favourable to the taxpayer in relation to reimbursed business mileage costs.

The case has been appealed to the Upper Tribunal, and it is expected that in any event HMRC will seek to limit its impact by arguing that it is not of widespread application, but employers and employees will be interested in the opportunities the case appears to provide.

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Human Capital Services – Global Director & EMEIA Leader

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