List of main recommendations
HMRC administration l A legislative framework to permit employers to payroll some or all of their benefits and expenses on a voluntary basis. l The scope of PSAs should be widened to permit employers to settle any tax liability on benefits and expenses. l Exemption to be added to the legislation for qualifying business expenses paid for or reimbursed by an employer. l The £8,500 threshold should be abolished, but with some simple mitigating steps to help some of those affected, and a consultation to confirm the mitigating steps. l Redefining in law a short, easy to understand ‘principles based’ definition of a trivial benefit, incorporating a per item cap, probably at £50. l Recommendations to reduce the number of ‘nil P11Ds’, including that the form should allow employers to indicate if a benefit is a one-off. l Flat-rate expenses need to be reviewed and updated, and employers allowed to include employees’ claims through the payroll. l HMRC’s website should have a simple initial guide to employer’s obligations with all relevant links.
Travel and subsistence l Legislation stating an employee can have only one permanent workplace, being the place where they spend the greatest part of their working time. However, if costings show that this route would be too expensive for the Exchequer, OTS recommends amending the statutory definition of ‘permanent’ and ‘temporary’ workplace by introducing a statutory percentage test, probably at 30 per cent. l A deduction for travel and subsistence expenses associated with a temporary workplace for the first 24 months regardless of the intended length of an assignment. l A specific code for homeworkers with one clear definition of homeworking for all tax purposes. l Remove the facility for employees to claim the cost of expenses not reimbursed by employers in working from home, but provide an uplifted
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homeworking allowance, for example £10 per week. l A section added to the Income tax (Earnings and Pensions) Act 2003 referring to ‘accommodation and subsistence expenses’. l In relation to benchmark scale rates, the guidance around ongoing checks should be amended to remove the requirement for employers to retain receipts. l Consideration is given to an exercise to modernise the rules for workplace lunches and canteens to improve consistency. l Where a deduction is available for attendance at a temporary workplace, living accommodation should be included in a P11D dispensation whether provided through hotel accommodation or use of a company flat (or equivalent). l A formal, comprehensive study is carried out on the possible radical idea of all travel and subsistence expenses (possibly not including ordinary commuting), being allowable only if reimbursed by the employer. l A formal review of tax reliefs for travel and subsistence should take place every ten years to make sure the system fully recognises changing work patterns.
Longer term projects: structural changes l Alignment of the underlying definitions of income and expenses for income tax and NICs. This means aligning the bases on which income tax and NICs are calculated, such that the basis for charging NICs should replicate as far as possible that for income tax. l The process should also look properly at the arguments for moving NICs onto an annual, cumulative basis. l The HMRC guidance provided for NICs and income tax should be reviewed and made consistent where possible. l Explore further the case for applying Class 1 NICs to all employee remuneration (whether cash or benefits in kind). l Fundamental review of the Government policy on benefits. This should look at whether the Government wants to tax cash or cash equivalents differently, whether the way a benefit is provided should determine how much tax is paid on it, and the question of what is a benefit and what is not.
...SUPPORTIVE OF THIS VERY COMPREHENSIVE REPORT AND FOR THE MOST PART THE RECOMMENDATIONS...
short, easy to understand principles based definition of a trivial benefit, incorporating a per item cap using £50, as an example. HMRC’s data, according to the report, showed around 500,000 P11D returns all reported values of under £100. This will add up to a tidy sum for the Exchequer so I am sure alternatives that meet with HM Treasury’s approval would need to be found. The report does offer a number of possible solutions including: one item per person; an annual cap per person; an annual cap per company; a cap per item.
Travel and subsistence The OTS report recommends looking again at what is defined as a ‘permanent’ and ‘temporary’ workplace. It recognises there may be a loss to the Exchequer with some of their recommendations and therefore offers a number of suggestions (e.g. percentage base at one place of work etc) should be considered. Another area the report covered was that of home-workers. Making the rules easy to understand (i.e. if the employee chooses home v business reasons for working from home). (I assume I would fall into this category; Carlisle to Birmingham is not really commutable!) It is also recommending the removal for employees to claim tax relief on expenses for working from home not covered by their employer e.g. telephone bills etc. It goes on to say that an uplifted homeworking allowance be provided (£10 per week) instead. What the report does not make clear is whether this would be a tax allowance of £10 per week or whether this is in respect of the voluntary employer home-working contribution. Clearly if any removal of expense claims was made then employers would surely be mandated to pay this, or would it be a taxable allowance included in the tax personal allowance code? The report considers employer-provided accommodation and subsistence expenses when attending a temporary workplace. It
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