Autumn Budget 2017 - Issues affecting Employers

Here we look at the Chancellor’s announcements in this year’s Autumn Budget affecting Employers.

Changes to the taxation of providing private fuel to employees

Part of the chancellor’s budget included allocating £400m specifically aimed at a nationwide charging network for electric cars in an attempt to assist motorists to make the switch from petrol/diesel cars to electric.

Notably for individuals with electric cars, the chancellor announced that he would legislate from 6 April 2018 that employees charging their electric cars at work would not incur a benefit in kind charge.

This change means that providing fuel to employees with electric cars compared to the conventional petrol/diesel cars will be not only cheaper but significantly more tax efficient to both the employee and employer.

Employees with petrol/diesel cars will continue to be assessed on a benefit in kind calculated by multiplying a percentage linked to the CO2 emissions of a car by flat rate of £23,400 – an £800 increase on 2017/18.

Employees with company vans will see a small increase to the flat rate private fuel benefit to £633 from £610.

Increased benefit in kind for diesel vehicles

Company car benefits are normally calculated by reference to the list price of a car, ordinarily defined as the ‘showroom’ value of the car when new, and a percentage determined by the CO2 emissions of a car.

It has long been the case, however, that the relevant percentage for cars is increased by a supplement of 3% if the car is propelled by diesel, subject to a maximum of 37%.

From 6 April 2018 the diesel supplement will be increased from 3% to 4% for cars which are solely fuelled by diesel and cars which were registered on or after 1 January 1998 which do not have a registered Nitrogen Oxide (NOx) emissions value. Cars that meet new emission standards will not be subject to the supplement, and neither will diesel hybrids.

This is a continuing trend with the government making it increasingly expensive to run diesel cars to reflect their increased cost to society, in an effort to persuade employers and employees to choose more environmentally friendly cars.

IR35 consultation

In April 2017, the government reformed the way in which off-payroll workers were taxed on engagements within the public sector. This extends the legislation that has been commonly referred to as IR35.

Historically, it would be the employee’s company’s responsibility to assess whether the IR35 rules applied to it, however, from April 2017, that responsibility shifted to the work provider if that organisation was within the public sector.

The government have suggested that, due to the above change, tax compliance in IR35 has improved as a result and, therefore, the next logical step would be to apply these rules to the private sector.

Although a full change has not yet been announced, the government have indicated that they will ‘carefully consult on how to tackle non-compliance in the private sector, drawing on the experience of the public-sector reforms’.

Employee expenses guidance

An unclear and often confusing area of employment tax is the claims process for employee expenses and claiming tax relief on expenses which haven’t been reimbursed by the employer.

Employees who are not reimbursed genuine business expenses from their employer are often not provided with information on how to claim relief on these expenses from HMRC. This leads to individuals being left to their own devices in complex HMRC manuals and can lead to employees not claiming all of the tax relief they are entitled to.

In an attempt to simplify the rules and make the claims process easier for employees, HMRC will seek to improve their existing guidance. A time frame or details on how this change will be implemented has not yet been issued but Shorts will provide further information once it becomes available.

If you wish to discuss how the Autumn Budget affects you in more detail, then please do not hesitate to contact us.