Professional June 2021

O N L I N E L E A R N I N G

Payroll

Learn how to process a number of common termination packages correctly, from redundancies to contractual breaches, retirement and death-in-service. Termination payments

being ‘unavailable’. However, if officers claim that there have been unavailable days during the 2020/21 tax year, full records will need to be provided to justify any reduction of the benefit. ...the OpRA legislation cannot be ignored when reporting P11D benefits, and HMRC is likely to be checking this ... Emergency vehicle exemption A statutory exemption is set out at section 248E of the Income Tax (Earnings and Pensions) Act 2003. It has been in place since 2004, and the rules have been relaxed to include all ordinary commuting, instead of just ‘on call’ commuting. In addition to commuting, the legislation permits a certain amount of ‘freedom of movement’ mileage. This relates to private mileage undertaken ‘locally’ when officers are on 24-hour call. With the increase in taxation for ‘use of asset’ cars, officers might be more tempted to agree to vehicle use in accordance with the emergency vehicle exemption, despite the restrictions to use that this would create. The move to an exempt car would free up a substantial amount of cash for officers to consider having a second car or hiring one for private journeys when needed. Now that the transitional rules have ended, there is a case for employers in the sector to consider introducing an option for section-248A exempt use. Otherwise, officers in blue light cars may question why they are made to pay tax on undertaking commuting and/or freedom of movement journeys, which are permitted under the exemption. In some cases, officers may only become aware of the additional tax costs arising on the use of their blue-light cars after the P11D returns have been produced. The amendment to section 248A, so that ordinary commuting is now permitted within the exemption, should be viewed as a way of encouraging its widest application. As significant ‘private’ mileage is now covered by the exemption, it is clearly a

sensible option that emergency services should consider implementing.

Cash or allowance In addition to ‘use of asset’ and exempt cars, some emergency services have adopted a third option whereby officers can take a cash sum and provide their own car to which the emergency service will fit ‘blues and twos’ and radios. Doing so may, however, provide an unwelcome surprise for those officers who have opted for use of a vehicle meeting the conditions of the section-248A exemption. Where a cash alternative is available, the optional remuneration arrangements (OpRA) must be considered. The OpRA rules require a comparison to be made between the taxable benefit of the car provided and the amount of the cash alternative. Therefore, as the section-248A benefit is nil, officers would be taxed on the amount of the cash option, even though they are not receiving it. Employers need to be aware that the OpRA legislation cannot be ignored when reporting P11D benefits, and HMRC is likely to be checking this point during forthcoming employer compliance reviews. If the cash option is high enough it might even adversely affect officers opting for a provided vehicle with unrestricted use and paying tax under the ‘use of asset’ rules. n Actions to consider? ● Private fuel – review what fuel has been reimbursed and offer the officers the opportunity to repay any private fuel to avoid the higher tax charge. ● Unavailable days – ensure that there are sufficient records to justify a reduction in the benefit for these. ● Benefit reporting – ensure that the changes to legislation and increased tax charges have been brought to the attention of all officers affected, prior to issuing P11D returns. ● Emergency vehicle exemption – revise and update use of vehicle policies and procedures so that officers have an option to agree restricted vehicle use meeting the conditions of S248A, the emergency vehicle exemption. ● Cash option – consider withdrawing any cash/allowance options based on operational requirements and moving to a provided car only approach, with officers still able to choose between restricted or unrestricted use.

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| Professional in Payroll, Pensions and Reward |

Issue 71 | June 2021

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