U.K.: Benefit Tax Rules to Be Simplified

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July 7—Her Majesty's Revenue and Customs launched four consultations June 18 on proposals to simplify the tax rules and administration of employee benefits and business expenses. The proposals are in response to a January report from the Office of Tax Simplification recommending changes to ease employer compliance burden.

Three of the consultations involve noncash benefits (”benefits in kind”) such as employer-provided cars or private medical insurance. Some noncash benefits are nontaxable for all employees, some taxable for all employees, and others taxable for certain employees but not all. Often, noncash benefits require additional employer reporting for tax and national insurance purposes.

The four consultations will consider the following issues:

  •  Should the 8,500-pound ($14,500) threshold for taxation of benefits in kind be abolished? Currently, employees who earn less than 8,500 pounds a year are not taxed on benefits in kind. According to the government, application of this threshold adds unnecessary complexity for employers.
  •  Should there be a statutory tax exemption for “trivial” benefits in kind, such as a bouquet of flowers given to an employee on the birth of a child or the death of a loved one. There is currently no value threshold at which such gifts become taxable and reportable, which the government believes creates unnecessary expense and administrative burden for both employers and tax administrators.
  •  Would it ease employer burden to withhold tax on noncash benefits as part of the payroll process rather than (as now) reporting and taxing them as a separate process?
  •  Should employers be allowed to determine for themselves whether expense reimbursements are taxable and treat them accordingly at the time of reimbursement? Currently, employers are required to withhold tax on the payments and report them to the government at the end of the year, and employees must separately claim tax relief for the reimbursement.
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    Additional information is available at https://www.gov.uk/government/news/government-consults-on-simplifying-employee-benefits-in-kind-and-expenses.