Employment tax issues arising from the Finance Bill 2018-19
By Justine Riccomini, Head of Taxation (Scottish Taxes, Employment and ICAS Tax Community)
24 July 2018
Four Finance Bill items have an immediate effect - and two of these are employment tax-related. Justine takes a look at what employers need to know about.
The draft legislation contains employment tax measures first proposed in the last Autumn Budget 2017, and those which concern employers are:
- new measures addressing anomalies in optional remuneration arrangements (see part 1, clause 1);
- the removal of tax liability for charging electric cars or plug-in hybrids at or near the employee’s workplace (part 1, clause 2);
- income tax exemptions for emergency vehicles (part 1, clause 3);
- exemption for travel-related expenses (part 1, clause 4); and
- a re-defining of the meaning of “beneficiary” of tax-exempt employer-provided pension benefits (part 1, clause 5).
Optional Remuneration Arrangements (OpRA)
From 6 April 2019, two anomalies affecting car and van benefits will be removed. These anomalies arise in connection with the associated costs of providing a car at S.120A/121A ITEPA 2003 and a van at S.154A ITEPA 2003 (they can currently be ignored); and capital contributions made by the employee at S.132A ITEPA 2003 (they can currently be overstated due to there being no requirement to apportion the amount over the tax year).
Electric or hybrid vehicle charging exemption
From 6 April 2018, employees will not be taxed due to a new exemption in S. 237A ITEPA 2003 when an employer provides charging facilities and the electricity supplied to enable employees to recharge all-electric or plug-in hybrid vehicles either at or near their workplace. A corresponding NICs exemption also exists, meaning employers will not be changed Class 1A NICs either. Note, however, that the same exemption does not apply to charging vehicles at another location such as a service station.
Emergency vehicles exemption
From 6 April 2017 (note the one year back date) S. 248 ITEPA 2003 is amended such that drivers of emergency vehicles are permitted to commute to and from the workplace when they are not designated as being on-call without incurring a car benefit charge. Instead of this, an alternative benefit charge now exists at S.205 ITEPA 2003 (use of assets provisions) where an employee uses the vehicle privately, a mile for mile calculation must be made to apportion the private use and thus calculate the benefit. Where no private fuel is provided by the employer, or it has been fully reimbursed by the employee, no additional charge will apply, per S.205 (5) ITEPA 2003. On-call mileage is not counted towards private mileage.
Travel-related expenses
So-called ‘benchmark scale rates’ are capable of being paid to employees traveling on business free of tax and NICs under S.289A ITEPA 2003. From 6 April 2019, a new S.4A S.289A ITEPA 2003 inserts condition C, requiring employers to check that the qualifying travel relating to the expenses reimbursement has actually been undertaken. Overseas scale rates for accommodation and subsistence are also being brought onto a statutory basis in response to the summer 2017 consultation on employee expenses.
Beneficiaries of tax-exempt employer-provided pension benefits
An amendment is to be made to S.307(2) ITEPA 2003, widening the scope of the term “beneficiary” as regards life assurance and overseas pension schemes. The wording will change from “a member of the employee’s family or household” to “paid or given in respect of the employee to any other individual or to a charity”. This measure is effective from 6 April 2019.
Conclusion
The measures should, for the most part, make life easier for employers especially when having an employer compliance inspection – yet as ever, employers must be careful that they adhere to the specific rules set out to avoid unwanted tax liabilities.