New focus on the taxation of benefits 

The Spring Budget 2017 has shown its intent to complete a general review the treatment of Benefits in Kind (BIK) provided to employees.

The government will publish a call for evidence on 20 March 2017 to look into the exemptions and valuation methodology for BIK. In keeping with the overall Spring Budget message, the government aim is to ensure the tax system can be made fairer and more consistent.

This has real impact on employees and employers alike. Any changes in exemptions and methods of valuing will impact employees directly based on their marginal tax rate and employers with the Class 1A National Insurance Contributions at 13.8 per cent.

It is also important to consider any changes that will impact on the payrolling of benefits. Any reforms in how payroll benefits are calculated will require in month reporting rather than a year end adjustment.

Employer provided accommodation

In addition to the general call of evidence for BIK, the Spring Budget 2017 has also stated there will be a consultation paper published on 20 March 2017 with proposals to bring the tax treatment of employer provided accommodation and board and lodgings up to date. This will also cover when accommodation is considered to be exempt from tax.

The accommodation benefit has been long overdue for reform particularly since the Office of Tax Simplification report in July 2014 which highlighted HMRC’s concerns. Currently, the calculation of the accommodation benefit is generally accepted as outdated since it is based on the rateable value in 1973 and whether the property is valued above £75,000 where the property is owned by the employer.

Whilst reform of the rules is clearly overdue, employees are likely  to have benefited from the historic rules and reform is likely to involve an increase in the tax cost attached to employer provided accommodation.

For more information please get in touch with Graham Farquhar, or your usual RSM contact.