Update on employment taxes for housing associations

Update on employment taxes for housing associations

The Government consultations and Office of Tax Simplification (OTS) recommendations likely to have the largest impact on the social housing sector.

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UPDATE ON EMPLOYMENT TAXES FOR HOUSING ASSOCIATIONS

Expenses and benefits

Draft legislation and guidance is currently being written on the following key changes that are due to be implemented from April 2016: 

  • The abolition of the £8,500 threshold for P11D reporting. This means that employees earning below £8,500, e.g. paid board members, may face additional tax charges on expenses and benefits provided to them.
  • The implementation of a business expenses exemption, leading to the abolition of P11D reporting dispensations. While this may appear to be a simplification, it will create a greater onus on housing associations to self-assess the correct income tax and National Insurance Contribution (NIC) treatment of expenses without the assurance provided by the P11D reporting dispensation. 
  • A new voluntary system for the payrolling of benefits that has the potential to reduce the number of P11D forms being completed each year, but will involve system and process changes. In addition, an extensive employee communication exercise will be required as employees will pay tax on benefits when they are provided and not after the end of the tax year.
  • A trivial benefits exemption of £50 for benefits that are not provided as a reward for service e.g. a bouquet of flowers for a wedding. This was due for implementation in April 2015 but has been deferred until at least April 2016.

Employer-provided accommodation benefits

The OTS have made a number of recommendations in relation to both the available exemptions and valuing the taxable benefit in kind for employer-provided accommodation. 

Many housing associations provide accommodation to caretakers and scheme wardens and typically report taxable benefits in kind to HMRC of between £500 and £1,000 per annum. The changes proposed by the OTS are likely to significantly increase the value of the benefit reported and it is important that associations are involved in any consultation process.

Construction Industry Scheme (CIS)

As housing associations have set up development companies and other vehicles for carrying out repairs and maintenance, the CIS reporting obligations have become more complex. Many associations have relied on the exemption excluding charities from CIS reporting - having failed to appreciate that this does not to apply for any non-charitable subsidiaries. 

HMRC are aiming to simplify the administration of CIS, although this will not remove all reporting requirements for non-charitable companies. Having engaged with HMRC to settle a number of expensive disclosures on behalf of our clients, we urge all associations to review their CIS compliance.

Travel and subsistence

HMRC updated their guidance on tax relief for employee travel including some important points of clarity which are of interest to the sector. 

In particular, the rules in relation to travel and subsistence expenses for Non-Executive Directors and board members have been confirmed. The guidance outlines that in some cases where the location of the board meeting changes, tax relief may be available for travel and subsistence expenses for attending board meetings. 

We are aware of a number of associations that currently meet the tax and NIC cost of these expense on behalf of board members, either via payroll or the PAYE Settlement Agreements (PSA), and we therefore recommend that this is reviewed. Where the expenses are included in the PSA, consideration should be given to reviewing the position in advance of the 2014/15 payment deadline on 22 October 2015 to prevent an overpayment of income tax and NIC being settled.

Other issues

Finally, the OTS have issued their views on changes to termination payments and a recommendation to remove the £8,000 limit for qualifying relocation expenses. It has not yet been confirmed whether these recommendations will be introduced into legislation by HMRC but further consultations are ongoing. 

If you would like to discuss these matters in more detail, please contact Paul Moreels, or your local KPMG tax contact. Stay in touch with the latest Employment Tax matters through KPMG’s Employers’ Club.

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