Benefits and expenses reforms on way

Chancellor George Osborne used his 2014 Autumn Statement to announce new reforms of employee benefits and expenses.

He confirmed on 5 December that following recommendations by the Office of Tax Simplification, rules would be updated to make the taxation of benefits and expenses “more straightforward and effective”.

Work is now under way to introduce legislation through the 2015 Finance Bill that will

  • introduce a statutory exemption for trivial benefits in kind costing less than £50 from April 2015
  • introduce a system of collecting income tax through voluntary “payrolling” of benefits in kind
  • under current arrangements, employers can obtain a dispensation from HM Revenue & Customs (HMRC) that allows them to pay specified expenses to employees without having to report them to HMRC, and without having to deduct tax and national insurance contributions. The government will now replace this regime with an exemption for paid and reimbursed expenses
  • from April 2016, the government will remove the £8,500 threshold below which employees do not pay income tax on certain benefits in kind and replace it with new exemptions for carers and for ministers of religion.

The government says the changes will reduce the cost of the administrative burden on employers by an estimated £20 million per year.

As the benefits and expenses regime continues to evolve, Moore Thompson’s professional payroll service can provide full support to employers to help them meet new requirements and remain compliant with HMRC. For more information, or to discuss in more detail your payroll requirements, please contact us.