Expenses, benefits, Salary Sacrifice and OpRA. Sue Fisher MCIPP Assoc.CIPD

Transcription

1 Expenses, benefits, Salary Sacrifice and OpRA Sue Fisher MCIPP Assoc.CIPD

2 Expenses - Why do we have to complete these forms? Simply: If an individual is in receipt of earnings to which the Benefits Code is applicable Then: Form P11D is completed for employees The amount reported is either the cash equivalent, relevant amount of the benefit or cash forgone Benefits and expenses provided for members of a person s family or household including civil partners" may also have to be reported on form P11D.

3 The Benefits Code ITEPA 63 Chapters of the Benefits Code, are as follows: chapter 3 - expenses payments chapter 4 - vouchers and credit tokens chapter 5 - living accommodation chapter 6 - cars, vans and related benefit chapter 7 - loans chapter 10 - residual liability to charge.

4 Expenses - Why do we have to complete form P11D? Completion is required when: in the performance of the duties of employment the duties themselves must require the employee to incur the expenditure and the act giving rise to the expenditure must be done in the actual performance of such duties wholly incurred the expenditure must not serve a dual purpose, i.e. both a business purposes and a non-business purpose necessarily incurred all holders of the particular employment must incur the expenses and it must not be possible to perform the duties of the employment without incurring the expense exclusively incurred the expenditure must be solely attributable to the performance of the duties and any other purpose secured from the expenditure must be merely incidental.

5 Employees are: employed under a contract of service under a contract of apprenticeship in the service of the crown also includes office-holders e.g. directors and company secretaries. What is the definition of an employee?

6 Reporting - is not required where items are covered by: SA ESC SE PSA Special Approvals Paying above HMRC Benchmark rates Extra-Statutory Concessions Where a strict application of tax law would create minor anomalies and impose an unreasonable tax liability in marginal circumstances. Statutory Exemptions The provision of any such exempted benefits does not give rise to a charge under PAYE or a requirement to report on a P11D PAYE Settlement Agreements Employer agrees to bear the liability of PAYE tax and NICs on benefits that are deemed, irregular, minor or impracticable.

7 Remember! - PSA renewals have changed. April 2018 HMRC confirmed: PSA for 2018/19 will be approved between HMRC and employer PSA becomes an enduring agreement No annual renewal As long as the agreement remains accurate 2018/19 form P626 was issued based upon 2017/18 PSA agreements Employers could set up a new enduring agreement Based upon different criteria Annual calculations will still be required.

8 Questions? How many of you have PSAs? How many of you have received the 18/19 P626? How many of you have had to seek further approval? Who thinks the renewal system has improved?

9 Optional Remuneration Arrangements HMRC guidance! For the purposes of the benefits code, a benefit is provided under an optional remuneration arrangement if it is provided under an arrangement of either type A or type B: Type A - arrangements under which the employee gives up the right, or the future right, to receive an amount of earnings (for example salary) which would be chargeable to tax under Section 62 ITEPA 2003 in return for the benefit Type B - arrangements, other than type A arrangements under which the employee agrees to be provided with a benefit rather than an amount of earnings (for example the option of a cash allowance) Where a benefit is chosen instead of some form of cash pay, the taxable value of the benefit is the greater of the amount of cash pay given up and the taxable value under the normal benefit in kind rules. Where the two are the same, then apply the normal benefit valuation rules. A benefit provided under an optional remuneration arrangement includes any benefit or facility, regardless of its form and the manner in which it is provided.

10 Optional Remuneration Arrangements (OpRA) What is Optional Remuneration? The tax / NIC charge is based on the higher of: The cash equivalent of the BiK or The amount of salary forgone less any amounts made good by the employee Where a Cash Allowance is taken there is no reporting requirement.

11 What schemes are in or out of scope? Salary Sacrifice schemes in scope are: Pensions including pension s advice Childcare voucher or workplace nurseries Direct employer contracted childcare Cycle to work including accessories Cars with emissions at or under 75 CO2/km Flexible Benefits where intangible benefits can be purchased, such as: Annual Leave Flexible working.

12 What schemes are in or out of scope? Salary Sacrifice schemes out of scope include: Car parking Private Medical / dental insurances Technology / mobile phones Cars (over 75 g/km) / vans Accommodation Use of assets Transfer of assets Authorised mileage allowance payments Own goods / products Health assessments.

13 How is the liability to PAYE tax and NICs calculated Type A Computer equipment provided over a 3 year period Market value - 1,800 Salary Sacrificed per annum Annual asset value Years 1 3 the value of the asset is compared to the amount of salary sacrificed. So 400 compared to 360 The relevant amount reported on the P11D in years 1-3 is 400 as this is the higher amount Year 4 ownership of the asset is transferred to the employee the amount reported is 600 even though the market value is 450 and the employee has forgone 450 This is calculated by taking the higher of the market value( 450) at time of transfer and the market value ( 1,800) when the asset was first available as an employer related benefit. Deduct the cost of the benefit for each year it was provided as an employer related benefit (3 x 400 = 1,200). The total cost 1,200 is then deducted from the market value 1,800 when first available giving a benefit charge of 600.

14 Assets placed at employees disposal- Salary Sacrifice arrangements Years 1-3 asset made available Section L P11D Computer

15 Transfer of assets - Salary Sacrifice arrangements Year 4 asset transferred Section A P11D Computer

16 Optional Remuneration Arrangement Type B The choices are: Car Allowance or Company Car Which would you choose?

17 What we know Regardless of whether the calculation is The established or OpRA The starting point for both is: Published list price of the car, and standard accessories on the day immediately preceding the date of first registration Plus any delivery charge and taxes.

18 Optional Remuneration Arrangement Type B Car 2017/18 Cash equivalent - 5,750 Cash forgone - 6,000 Use Cash forgone 2018/19 Cash equivalent - 6,000 Cash forgone - 6,000 Use Cash equivalent List price - 25,000 CO2 emissions - 23%, 24%, 25% Cash allowance - 6,000 Signed up to the car on 6 April /20 Cash equivalent - 6,250 Cash forgone - 6,000 Use cash equivalent

19 Calculating the car benefit OpRA Type B Vauxhall Insignia 1.6i 16v ,095 1,900 22,995

20 Calculating the car benefit OpRA Type B A 125

21 Calculating the car benefit OpRA Type B

22 Calculating the car benefit OpRA Type B ( 22,995 x 24%) 5, ,300 4,218

23 Calculating the car benefit OpRA Type B (Cash Allowance) 4,550 1,900 ( 1,900 x 24%) 456 4,094 4,094 6/4/2018 Expenses and Benefits Workshop 23

24 Completing the P11D OpRA Type B Vauxhall Insignia 1.6i 16v A ,095 1,900 1,900 4,094 4,094

25 Benefit only No choice Vauxhall Insignia 1.6i 16v A ,095 1,900 1,900 3,870 3,870

26 Optional Remuneration Arrangement Type B The choices are: Car Allowance or Company Car Now! Which would you choose?

27 Just the Cash Allowance or Just the benefit Where it is purely a cash allowance on offer No reporting requirements Through the payroll for PAYE tax and NICs. Where it is just the benefit on offer Reporting requirements are as they have always been Relevant section on the P11D

28 What next? Who knows what the government or HMRC have hidden up their collective sleeves.

29 Thank you for attending Any Questions?