This article provides a few highlights from the Budget as they impact on employment taxes.
Enterprise Management Incentives (EMIs)
A number of changes will be made to the EMI legislation for both the individual and the company.
Individual
The individual employee limit on an option granted on or after 6 April 2008 will increase from £100,000 to £120,000 per employee.
Company
A number of minor changes are being made to the qualifying company rules. With effect from the date the Finance Bill receives Royal Assent (likely to be early July), a further test will be introduced whereby qualifying companies can only employ fewer than 250 employees to be eligible to use the scheme. Furthermore, companies involved in shipbuilding, coal, and steel production will no longer qualify.
Action point
Employers may want to consider their current arrangements and accelerate to well before July 2008 any plans to incentivise employees with EMIs if they are affected by the qualifying company changes.
Employment-related securities
Legislation will be introduced which will be effective from 6 April 2008 whereby employees receiving remuneration in the form of shares or share options, who are resident but not ordinarily resident in the UK, will be subject to the same rules as resident and ordinarily resident employees who receive similar remuneration.
Action point
Employers should consider accelerating to before 6 April 2008 any plans to reward short-term resident employees in this way.
Company Car Benefit Tax
Company car tax is calculated by applying a percentage to the list price of cars provided to employees, the percentage increasing in line with the CO2 emissions rating of the car provided.
From 6 April 2008, a lower percentage rate of 10% (13% for cars with diesel engines) will apply to cars with a CO2 rating of 120 g/km or less. Further changes will be made to the CO2 rating thresholds from 6 April 1010.
Action point
Employers will need to ensure their systems are accurately recording the new thresholds and consider the types of cars they want to provide to their employees.
Employer-provided vans: Fuel Benefit Rules
Employees who are provided with private fuel for use in company vans are charged tax on a flat rate benefit of £500. The current legislation is worded in such a manner as to suggest that employees in receipt of such fuel might also be open to further tax based on the cost of the fuel.
This anomaly will be removed, ensuring that the £500 benefit will be the only charge liable to tax in relation to private fuel provided for use in vans. This will bring company van drivers in line with company car drivers who are taxed only on the car fuel scale charge where fuel is provided for private use.
Action point
Employers must ensure that accurate mileage records are maintained if the benefit in kind charge and Class 1A National Insurance charges are to be correctly calculated.
