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Budget – Implementing the Office of Tax Simplification’s proposals
Thursday, March 24th, 2011
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Last week’s newsletter included a review of two reports issued by the Office of Tax Simplification in time for consideration by the Chancellor for his Budget announcements on 23 March. A number of the recommendations found their way into the Budget, as follows.
Of the various tax reliefs considered by the OTS, 43 are to be abolished, some obsolete reliefs immediately, others from April 2012, still others at a later date. Those relevant to payroll and to employment payments and benefits are:
From April 2011, some reliefs unrelated to payroll.
From April 2012, in the Finance Bill 2012, following consultation:
- Payments to mariners – exemption from Class 1A NICs for interim payments of advances of earnings, while sick overseas, and paid in part to another person
- Payment for the benefit of spouse and children – tax relief up to a maximum of £100
- Provision of meals on cycle-to-work dates
- Late night taxis
- Daily relief for the first 15p of luncheon vouchers
- Apprentices and students coming to the UK – no liability to Class 1 NICs for the first 52 weeks subject to certain conditions
- NICs exemption for payments by credit card provider for recovering lost or stolen cards
After 2012 in a future Finance Bill, following consultation:
- Relocation expenses other than removal expenses – exemption from Class 1 NICs
Of those reliefs recommended for abolition, the following are not mentioned in the Budget documents and, presumably, they will continue in place at present:
- Trade union subscriptions – that part of subscriptions relating to superannuation, death benefits and funeral expenses through a life assurance policy
- Police organisations – as above, for trade union subscriptions
- Miners’ coal and allowances in lieu of coal
- Class 4 NICs exemption for divers and diving supervisors
- Welfare counselling facilities that are exempt from Class 1A NICs
- Blind person’s allowance.
However, one other recommendation, the proposal to abolish contracting-out for defined benefits schemes, has been taken up and is explained in the section below on State Pension reform.
One of the positive recommendations of the OTS has also been accepted, namely the longer-term integration of PAYE income tax and Class 1 NICs. As implementation of this proposal will be complex and involve a wide range of policy and implementation issues, the Government intends to start consultation on the options, stages and timing of reform. The Government confirms that NICs will not be extended to individuals above State Pension age or to other forms of income such as pensions, savings and dividends.
The OTS put forward three options relating to IR35. The Government has decided not to abolish the rules as it believes that substantial revenue is at risk. Instead, a commitment is made to making clear improvements in the way IR35 is administered, including setting up a dedicated helpline staffed by specialists, publishing guidance on those types of cases HMRC view as outside the scope of IR35, targeting compliance activity by restricting reviews to high risk cases and setting up an IR35 Forum to monitor the new approach.
Further information about the second stage of the OTS review of small business tax, the Government’s response to the OTS reviews and the future work of the OTS will be announced before summer 2011.
