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Employment issues

Company car tax rates

Legislation will be introduced in Finance Bill 2012 to increase the appropriate percentage of the list price subject to tax for cars with CO2 emissions of more than 75gm/km by 1% up to a maximum of 35% in 2014/15.

Further changes are proposed in 2015/16 and 2016/17 whereby the appropriate percentages of the list price subject to tax will increase by 2% per annum up to a maximum of 37% in both years.

Other changes

• From April 2015 the five year exemption for zero emission cars and the lower rate of 5% for ultra low emission (1-75gm/km) cars will come to an end.
• The percentage for zero emission and all low emission petrol cars emitting less than 95gm/km of CO2 will be 13% in 2015/16, rising to 15% in 2016/17.
• The percentage for low emission (95gm/km) diesel cars in 2015/16 will be 16% as it will include the 3% diesel supplement.

From April 2016 the Government will remove the 3% diesel supplement so that diesel cars will be subject to the same level of tax as petrol cars.

Car and van fuel benefit charges

Employees and directors who are provided with a company car and who also receive free private fuel from their employers are subject to the fuel benefit charge. The benefit charge is determined by multiplying a set figure by the appropriate percentage for the car based on its CO2 emissions.

The car fuel benefit charge multiplier will be increased from £18,800 to £20,200 with effect from 6 April 2012. The multiplier will increase by 2% above the rate of inflation (based on RPI) in 2013/14.

The van fuel benefit charge multiplier will remain frozen at £550 for 2012/13 and will increase by inflation in 2013/14.

Real Time Information (RTI)

HMRC have produced draft legislation to introduce probably the most significant change in the PAYE system since its introduction in 1944. Under the RTI scheme, employers will electronically provide monthly information to HMRC related to wages and salaries paid to employees. Once the scheme is ‘bedded in’ employers will no longer have to complete year end returns such as the P35 and P14.

Volunteer employers are to pilot the new scheme from 6 April 2012. The intention is that it will apply to employers on a phased basis from 6 April 2013 so that all employers are operating the system by October 2013.

It was announced in Budget 2012 that HMRC will consult before the summer on new models for late payment and late filing penalties under RTI. Legislation will be included in Finance Bill 2013.

Income tax and NICs reform

The Government announced in Budget 2011 that it would consult on the options, stages and timing of reforms to integrate the operation of income tax and NICs. Since then, the Government has issued a call for evidence, published a response and set out an indicative timetable for reform. Following work with interested parties over recent months, the Government will consult shortly after Budget 2012 on a broad range of options for employee, employer and self-employed NICs.

Personal service companies and IR35

The Government is bringing forward a package of measures to tighten up on avoidance through the use of personal service companies and to make the existing IR35 legislation easier to understand. HMRC will strengthen specialist compliance teams and simplify the way IR35 is administered. HMRC will consult on proposals which would require office holders/controlling persons who are integral to the running of an organisation to have PAYE and NICs deducted at source.

Enterprise Management Incentives (EMI)

EMI are share option schemes which allow small and medium-sized businesses to grant tax-advantaged share options to employees. The limit on the value of shares over which options may be held by an employee under the scheme will be increased from £120,000 to £250,000. This will have effect in respect of options granted on or after the date set out in a Statutory Instrument, which subject to State aid approval, the Government intend to implement as soon as possible.

Additionally the Government will make reforms to the EMI scheme in Finance Bill 2013, subject to State aid approval, to ensure that gains made on shares acquired through exercising EMI options on or after 6 April 2012 will be eligible for capital gains tax Entrepreneurs’ Relief.

The Government will consult on ways to extend access to EMI for academics who are employed by a qualifying company.

Tax advantaged employee share schemes

The Government will consider the recommendations of the Office of Tax Simplification’s review of tax advantaged share schemes and will consult shortly on how to take a number of these proposals forward. Legislation will be included in future Finance Bills.

Pensions tax relief

Legislation will be introduced in Finance Bill 2013 to amend the rules which currently allow employers to pay pension contributions into their employees’ family members’ pensions as part of their employees’ remuneration package to remove the tax and NICs advantages from these arrangements.

A regulation making power will also be introduced to allow changes to be made to the lifetime allowance fixed protection legislation. Technical improvements will also be made to the annual allowance rules through secondary legislation.

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