If you are an employer who offers your staff in-work benefits-in kind, then you may be interested to hear about the latest government consultation. In the 2016 Budget the government announced plans about a number of potential reforms to salary sacrifice arrangements and changes to benefits-in-kind for both employees and employers. HM Revenues & Customs is now following through on those plans.
In the 17 page consultation document HMRC has suggested various options for limiting the range of benefits-in-kind that attract income tax and National Insurance Contributions (NICs) advantages when offered as part of a salary sacrifice deal. It is also suggesting proposals to realign the dates on which employees pay their employers for any benefits-in-kind they may have received: these ‘making good’ payments are normally paid through PAYE. HMRC has said it hopes the changes will lead to a “simpler and clearer system that makes it easier for employers and employees to understand their obligations”. The consultation process will end on 19th October, 2016.
Why bother with a consultation process you may wonder? Why not just impose the changes? Well, HMRC is apparently concerned about the impact any changes might make on both employees and employers if the government decides to “change the way the benefits code applies when a benefit-in-kind is provided in conjunction with a salary sacrifice or flexible benefit scheme”.
So if these reforms are introduced, will they apply to all benefits-in-kind? Well, not necessarily is the answer to that – on the face of it at least. The Government is still keen to encourage the use of health-related benefits-in-kind – such as the Cycle to Work scheme; so these are not included in the consultation process. However, the consultation document does state that it “does not prevent employers from providing benefits-in-kind to their employees through salary sacrifice, but it will remove the tax and NICs advantages that come from doing so”.
HMRC has also additionally stated that it will not consult on salary sacrifice regarding employer pension contributions, employer-provided pension advice and employer-supported childcare provisions.
Realigning payment dates and ‘making good’
- Within the legislation there are different dates set out for ‘making good’ on various benefits-in-kind in order to reduce or remove the tax charge. Some benefits-in-kind have more than one date for ‘making good’ within the legislation, while others have no statutory date specified.
- There seems to be some confusion around the issue of the car fuel benefit charge, as there are different dates by when an employee is required to ‘make good’. For other benefits-in-kind, like private medical insurance, an individual must ‘make good’ before the end of the tax year where the employer accounts for the benefit-in-kind in real-time via PAYE.
HMRC hopes the consultations – which close on 19th October 2016 – will lead to a clearer and simpler system in which employers and employees fully understand their responsibilities and obligations.