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Philip Hammond 'to mount tax raid on employee benefits' Philip Hammond 'to mount tax raid on employee benefits'
(about 1 hour later)
The chancellor is set to restrict the tax-free benefits offered by “salary sacrifice” schemes, where employees agree to reduced cash pay in return for certain benefits.The chancellor is set to restrict the tax-free benefits offered by “salary sacrifice” schemes, where employees agree to reduced cash pay in return for certain benefits.
According to tax experts, Philip Hammond is considering raiding employee benefits such as health checks, parking and gyms in Wednesday’s autumn statement, as he seeks to offset his possible spending plans.According to tax experts, Philip Hammond is considering raiding employee benefits such as health checks, parking and gyms in Wednesday’s autumn statement, as he seeks to offset his possible spending plans.
Cars could be heavily affected because nearly half of company cars are provided by businesses that offer a cash alternative — although it is possible that super-low emissions electric/hybrid cars could be exempted to encourage their greater take up. Cars could be heavily affected because nearly half of company cars are provided by businesses that offer a cash alternative — although it is possible that super-low-emissions electric/hybrid cars could be exempted to encourage take-up.
A government consultation has already said that pension contributions, childcare and cycle to work schemes will not be affected by the changes. A government consultation has already said that pension contributions, childcare and cycle-to-work schemes will not be affected by the changes.
Salary sacrifice schemes are a growing cost for the exchequer, and have grown by a third in the five years to 2014-15, particularly among those providing cars, health screening, mobile phones, televisions, computers and even white goods.Salary sacrifice schemes are a growing cost for the exchequer, and have grown by a third in the five years to 2014-15, particularly among those providing cars, health screening, mobile phones, televisions, computers and even white goods.
Employers benefit from salary sacrifice arrangements because it lowers the amount they must pay in national insurance contributions. Employees reduce their income tax bill.Employers benefit from salary sacrifice arrangements because it lowers the amount they must pay in national insurance contributions. Employees reduce their income tax bill.
Mark Groom, an employment tax partner at Deloitte, said it is unclear, even to the Treasury, what the value of such a move would be, but the sums involved were “relatively small beer”. Mark Groom, an employment tax partner at Deloitte, said it was unclear, even to the Treasury, what the value of such a move would be, but the sums involved were “relatively small beer”.
“The proposals will in fact go further than salary sacrifice, and are intended to apply wherever a benefit has been obtained instead of cash in any circumstances including, for example, cash alternatives, flexible benefit allowances and simple trading-up of benefits,” he said. “The proposals will in fact go further than salary sacrifice, and are intended to apply wherever a benefit has been obtained instead of cash in any circumstances including, for example, cash alternatives, flexible benefit allowances and simple trading-up of benefits,” Groom said.
He added that the benefits currently afforded a favourable tax treatment will be most impacted. He added that the benefits currently afforded a favourable tax treatment would be most impacted. “Typically these include death-in-service benefits, health screens, car parking, workplace gyms, work-related training, mobile phones and low-CO2 cars,” he said.
“Typically these include death in service benefits, health screens, car parking, workplace gyms, work-related training, mobile phones and low-CO2 cars,” he said.
The most affected perks are likely to be those involving benefits such as gym membership that are currently exempt from tax. If a company offered gym membership worth £360 a year under a salary sacrifice scheme — or offered it as a perk with a cash alternative — a basic rate taxpayer would pay an extra £72 of tax and the employer would pay just under £50 of extra national insurance contributions.The most affected perks are likely to be those involving benefits such as gym membership that are currently exempt from tax. If a company offered gym membership worth £360 a year under a salary sacrifice scheme — or offered it as a perk with a cash alternative — a basic rate taxpayer would pay an extra £72 of tax and the employer would pay just under £50 of extra national insurance contributions.
The changes are unlikely to affect private medical insurance, which is already liable to both tax and employer national insurance contributions (NICs). In a consultation, HMRC said that in most cases the changes would only apply to income tax and employer NICs, because no employee NICs were due on the vast majority of benefits in kind.The changes are unlikely to affect private medical insurance, which is already liable to both tax and employer national insurance contributions (NICs). In a consultation, HMRC said that in most cases the changes would only apply to income tax and employer NICs, because no employee NICs were due on the vast majority of benefits in kind.
Meanwhile, the AA has called on on the chancellor to cut Insurance Premium Tax (IPT), claiming it has has risen faster than any other form of taxation in recent years. Separately, the motoring organisation the AA has called on on the chancellor to cut Insurance Premium Tax (IPT), claiming it has has risen faster than any other form of taxation in recent years.
In November 2015, the rate of IPT on car and all other insurance products went up from 6% to 9.5%, and then another 0.5% on 1 October 2016 – rounding it up to 10%. In November 2015, the rate of IPT on car and all other insurance products went up from 6% to 9.5%, and then another 0.5 points on 1 October 2016, bringing it to 10%.
The AA and other insurance industry experts have expressed concern that the chancellor may add a further 2% to IPT on Wednesday. The AA and other insurance industry experts have expressed concern that the chancellor might add a further 2% to IPT on Wednesday. The AA said this would penalise those “who take responsibility for their belongings and property by insuring them”.
The AA said this would penalise those “who take responsibility for their belongings and property by insuring them”.