In August, the government announced a consultation on future tax treatments of benefits-in-kind. They’re looking at the benefits attracting income tax and National Insurance advantages and their fairness on the tax system. You can find out more about the terms of the consultation in our previous blog.
As an interested party, we recently attended a roundtable organised by HRMC to discuss the proposal.
Overall, from a scheme perspective, the greatest concern was around car salary sacrifice schemes.
Removing benefits such as computer and mobile schemes goes against the Government Digital Inclusion Strategy which aims to “equip the whole country with the skills, motivation and trust to go online, be digitally capable and to make the most of the internet”.
The potential loss of luxury items such as white goods or gaming consoles was not a major concern. A “white list” of eligible products was brought up as a potential way forward. A longer term suggestion was to consider adding wearable devices to any “white list” to support the ‘Start Active, Stay Active’ policy.
The intention is that the new rules would be applied retrospectively. There was concern that Grandfather Rights aren’t mentioned at all, which means employees who have already entered into a salary sacrifice contract could have their terms changed mid-contract, to their detriment. Employees who have already signed a salary sacrifice agreement should be able to come to the end of their contract on the terms initially agreed.
Over 80% of the Salary Extras applications for our computer scheme are from Basic rate taxpayers. So the lowest paid employees will be hit the hardest - whilst a switch to net pay deductions would continue to mean no credit checks, no interest charged, the ability to spread the cost - they will lose out on the financial savings that help make the goods more affordable.
Employee benefits are not just for large companies, they are used widely by companies of all sizes. 55% of our clients running a technology scheme (computers and mobile) have fewer than 250 employees, rising to 70% with under 500 employees. A change to the benefits-in-kind treatment would therefore impact companies of all sizes.
We expect an announcement in the Autumn Statement on 23 November to give more clarity on what the rules will be.
What actions should you take today as an employer?
Your opinion matters: it’s important you raise your concerns on the consultation document by 19 October 2016. Whilst the proposed direction has been outlined by government, you can still influence the final outcome.
This is the perfect opportunity to review your current benefit offering, and to understand the potential risk of a change in the legislation. This includes having a plan to communicate any changes to your employees.
You might also find gaps in your offering that need to be addressed. We advise you to work closely with your employee benefits provider to ensure you and your employees get the best possible outcome, whatever the result of the consultation.