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Office of Tax Simplification interim report on employee benefits and expenses: Quick Wins

Office of Tax Simplification interim report on employee benefits and expenses: Quick Wins

The Office of Tax Simplification (OFT) interim report on employee benefits and expenses, published in August, is a review of findings following extensive consultation with both employers and HMRC frontline staff on how the taxation of these areas could be made easier. It also includes a number of ideas and suggestions for change. As you would expect, some are ‘big picture’ which will take time and effort to discuss and implement. However, there is also a list of 43 ‘quick wins’ which are items   that could have a big, helpful impact quite quickly and with relatively little effort. Overall, as well as making things easier for those who incur non-taxable expenses, these changes could potentially simplify things for around 4 million employees and 300,000 employers who have taxable benefits and expenses.

The Quick Wins

Below is a selection of some of the 43 ‘quick wins’ which could be particularly helpful to contractors. Some of these ideas would require legislation to change and this is unlikely before the next election in 2015. Others simply need a change in how HMRC administers things or by secondary legislation, so could be implemented sooner.

Area

 

Detail

Needs legislation?

Benefits HMRC to encourage voluntary payrolling of benefits, in place of reporting benefits on forms P11D.

Yes

Benefits – accommodation HMRC to review published list of employments where it is “customary” to get accommodation.

No

Benefits – broadband HMRC to allow home broadband costs to be subject to PAYE Settlement Agreements.

Yes

Benefits – car fuel Car fuel benefit should be based on what you put in your tank, not how you pay ie: the differences regarding paying with a fuel card should not apply.

Yes

Benefits – car fuel Allow reimbursement of car fuel where employee contributes by 6 July.

Yes

Benefits – cycle schemes Carry out a proper evaluation of the cycle schemes success and look for ways of streamlining its administration.

Yes

Benefits – trivial benefits HMRC should publish a list of benefits they consider to be trivial, presumably with limits on the amounts.

No

Expenses – mileage rates Align tax and NICs treatment of mileage rates over 45p.

Yes

Expenses – mileage rates HMRC should not require retention of fuel VAT receipts for expense claims where only a mileage rate has been claimed.

No

Expenses – subsistence rates HMRC should give better guidance on what qualifies for subsistence expenses.

No

Expenses – subsistence rates HMRC should reinstate the practice of having a ‘friends and family’ scale rate.Currently employers cannot agree a scale rate with HMRC for expenses incurred by an employee if they stay with a friend or relative when travelling on business. Many employers find this unhelpful and argue that encouraging employees to stay with friends and family is much more cost effective than paying for hotel accommodation.

No

Expenses – travel and subsistence HMRC should commit to revising and updating the booklet 490 to fit better with modern working patterns.

No

Expenses – travel expenses HMRC to publish guidance on temporary workplace rules for projects carried out in phases.This is where an employee attends a temporary workplace for one phase of a project, then works elsewhere on a different project, then returns to the first project for a later phase. Under current rules they may fall foul of the 40 per cent rule by attending a workplace for a period of continuous work – for 40 per cent or more of their working time – for more than 24 months. Sometimes HMRC has treated these as two separate temporary workplaces. It was suggested that the rules are changed to give a clear statutory framework for these decisions.

No

Expenses – travel expenses HMRC should stop treating London as one workplace regardless of travel time.HMRC has sometimes deemed all of London as one workplace even though two separate workplaces could be one or two hours travelling time apart.

No

HMRC administration Improve guidance and design of Form P11D, for example state that you need a different form if the employee earns less than £8,500.

No

HMRC administration Add a box to the P11D to tick if the benefit is just for one year.

No

HMRC administration Allow voluntary notification of in-year changes to benefits.

No

HMRC administration HMRC to improve guidance on allowable expenses.

No

HMRC administration HMRC to allow all types of expenses claims to be made on one form, or online.

No

HMRC administration Improve web-site guidance and cross referencing, for example keep the What’s New pages up to date.

No

HMRC administration HMRC to improve layout and design of Form P87 for claiming expenses.

No

 

These are initial ideas and so far no priorities or further detail has been given. Over the coming months OFT will be discussing the report in detail with Treasury Ministers. It plans to publish its recommendations in stages with some coming out before the end of 2013 and some in January/February 2014.

For further information the full OFT Review of employee benefits and expenses: interim report can be found on their website.

 

This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.