By Amanda Flint, Partner in the Employer Solutions team at Grant Thornton UK
The Budget is good news for businesses wanting to take on new employees as the first £2,000 of National Insurance contribution (NIC) costs for any employee(s) will be exempt from NICs from April 2014.
There will be some consultation with a view to legislating later in the year. Given the scale of the relief this is only really of significance to micro or small employers but nonetheless welcome. This obviously does not help the one-man band organisation with no employees.
Some good news in the Budget when it comes to employee benefits, but with delayed effect.
The level of interest free loans that you can give to employees will double with effect from 6 April 2014 to £10,000. This will allow employers to provide interest free loans to employees of up to £10,000 without an income tax charge. Such loans are commonly used for travel season tickets but could also be used to fund share acquisitions or in the provision of other benefits.
Working parents can receive support for childcare from September 2015 for up to £6,000 of child care costs - giving up to £1,200 relief per child. In contrast, the current childcare voucher scheme is available to each working parent regardless of the number of children they have. As a result, there will be benefits for larger families under the new arrangements. However, for those receiving childcare vouchers under salary sacrifice arrangements, the cost to employees through salary sacrifice will be higher than was previously the case.
Supporting employees on return to work after sickness - employers will be able to provide tax free health related 'interventions' worth up to £500 per employee. There will be consultation this year and new provisions in the Finance Bill 2014.
There is an ongoing commitment to encouraging low emission cars. The company car tax regime is structured to build in an incentive to acquire low emission cars. With effect from 2015/16 the charge (calculated as a percentage of the list price) will be at 5% for cars emitting 0-50g of carbon and 7% for those emitting 50-75g of carbon. For those emitting more than 75g carbon the percentages will be increased by 2%. If you haven't already considered a green car scheme, now is certainly the time to do so.
Companies may be able to take advantage of the new employee shareholder provisions that come into effect from 1 September 2013. Employers can give up to £2,000 of shares free of income tax and NICs and employees can acquire up to £50,000 of shares in total - and gains on those shares will be free of capital gains tax.
So, if employees are comfortable with relinquishing certain statutory employment rights then this plan seems like a useful one. This will be particularly useful for companies that do not qualify for EMI (enterprise management incentive) option plans because their gross assets exceed £30m, they have 250 or more employees or because they are controlled by another entity such as a private equity house. The only real change here over the autumn statement announcement is that the introduction has been delayed until September.
From yesterday (20 March) if you claim corporation tax relief for your share plans you should ensure that any claim is under the terms of the legislation only and cannot also be claimed elsewhere. And if the claim relates to share options, it will only be forthcoming if shares are actually acquired. This is presented as a 'clarification' but actually seems aimed at avoiding a double deduction for corporation tax.
There is to be further consultation on unapproved share plans and management buyouts by employees, so watch this space as there may be some more valuable tax breaks in the fullness of time!
Other than for small discrepancies a new penalty regime will accompany RTI aimed at encouraging compliance. It applies to each PAYE scheme dependent on the number of employees in the scheme. Different size penalties will apply to micro, small, medium and large employers. There will be one late filing penalty per scheme per month regardless of the number of returns due. There is scope for one default per year which will not be penalised.
We also had an announcement that there has been a relaxation for employers with fewer than 50 employees. For a limited period until 5 October 2013 employers can send in information under their regular run but no later than the end of the tax month.
In summary, many of the changes are not as beneficial as the headline statements might lead you to believe. And benefits are some way in the future, whilst taxing provisions apply now.
Join us on