Payroll Changes for the April 2016 Tax Year part 3
Dispensations are to be replaced by Expenses Exemptions
The requirement for dispensations from HMRC for expenses are to be abolished. Under the original ruling, payments to employees for expenses should have been reported to HMRC on a P11D unless a dispensation was in place for that particular expense. From April 2016 all existing dispensations will no longer apply, and the concept of expense exemption is to be introduced.
A company will need to have systems in place to ensure employees are incurring and paying the expenses, and that a deduction would be allowed for these expenses. It is anticipated that examples of these systems will be produced by HMRC.
The company will need to be able to prove that these payments are only made to employees which would be eligible for a deduction, and that the employees are actually incurring an expense. More details will be produced, as there remains some complexity with scaled rates, benchmarks and bespoke rates.
There were some details available in the August 2015 Employer bulletin, and it is anticipated that more details will be produced as we move into the new tax year.
Benefits in Kind
The £8500 low income threshold for reporting benefits in kind has also been abolished, and the concept of trivial benefits introduced as part of the review of benefits and expenses. The benefits in kind that do not need to be reported are below £50 for an individual, and for directors and other office holders there is an annual cap of £300.
It is likely that further clarification and examples will be produced, but the aim is to reduce bureaucracy. For further details see here.
The £2000 employment allowance is expected to be raised to £3000 from April. Most private companies in the UK will qualify for this allowance and it is very simple to apply. It is likely that single director companies, where the director is the only employee, will no longer be eligible.
The chancellor will be announcing the budget on Wednesday, which may bring fresh changes, so please take these posts as advanced warning of expected changes.