2.13 In response to concerns raised by stakeholders, the Government has made some changes to the principles, to ensure that they provide the clarity required for the exemption to represent a real simplification. This includes allowing non-cash vouchers within the definition of a trivial benefit for the purposes of the exemption, to accommodate an individual’s beliefs or preference and to ensure equality of treatment. 2.14 The Government has also decided that the concept of whether a benefit is provided “irregularly” or not would not provide a clear definition that would give employers certainty of treatment. It would not be possible to ascertain in ‘real-time’ whether a benefit was provided irregularly without reference to other benefits an employee had received, undermining the simplification intended. 2.15 However, the policy intention is still to provide an exemption that allows employers to provide a small number of low cost benefits to employees, and so a suitable alternative principle was considered. In particular, consideration was given to the kinds of circumstances in which employers currently provide trivial benefits – these are intended to be related to personal events or to the welfare of the individual, outside of the performance of their duties as an employee. The Government has therefore decided to define a trivial benefit as one which is provided by an employer to support their employees’ welfare, and not in recognition of particular services performed by the employee in the course of the employment, or in anticipation of such services. 2.16 Finally, the Government has recognised the issue raised by respondents regarding how “pre-arranged entitlements” would apply within the exemption. The Government has decided that for there to be no pre-arranged entitlement, there must not be any contractual obligation to the benefit, including through salary sacrifice. An employer having a corporate policy of providing a benefit at certain points in the year, but without a contractual obligation to do so, would not be caught by this definition.
Further consultation will be held on models and the writing of guidance with stakeholders, and the CIPP will look to be involved in this.
HMRC will remove the current practice (very small and minority) of those who allow employees to salary sacrifice expenses.
HMRC will continue to allow employers to have custom scale rates but employers will need to seek approval from HMRC based on random sampling and complete a prescribed form.
Legislation will be laid to allow employers to use this new process from April 2016.
The Government recognises the importance of flexibility for employers, but is also mindful that one of the purposes of putting payrolling on a statutory basis is to provide consistency for both employers and employees. Lack of consistency and transparency for employees creates uncertainty and drives-up queries for employers and HMRC.
2.34 To support flexibility for employers and that “locking-in” to a scheme of payrolling might deter some employers from opting-in, the Government will develop a scheme that is entirely voluntary, so that an employer that has started payrolling can choose to opt-out with effect from the start of a tax year. There are some practical issues should an employer decide to opt-out, such as reinstating benefits in employees’ PAYE tax codes. HMRC will work on these to support employers who may decide to opt-out.
CIPP Policy News Journal
08/04/2015, Page 164 of 521
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