UK: Tax changes affecting employers; “amortised cost basis of accounting”

UK: Tax changes affecting employers

Tax professionals in the UK anticipate that the Autumn Statement, scheduled to be delivered 25 November 2015, may include measures that could affect employers, such as changes to the tax treatment of termination payments. There may also be indications as to how the government intends to move forward on certain proposals related to pensions.

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In any event, employers need to prepare for the following changes that will be effective from 6 April 2016:

  • Voluntary “payrolling” and a business expenses exemption
  • Repeal of the £8,500 threshold for “benefits in kind”
  • The Scottish rate of income tax 
  • Increased NICs employment allowance
  • NICs exemption concerning apprentices who are under 25 years of age
  • Restrictions on travel and subsistence relief for workers engaged through intermediaries

New definition of amortised cost basis of accounting

Finance Bill 2015-16 amended the loan relationship rules to include a new definition of “amortised cost basis of accounting.” The term is relevant for certain provisions in the loan relationship rules. For example, taxable debits and credits from loans between connected companies are required to be determined on an amortised basis of accounting, and a statutory relief for releases of loans (for example, for an issue of shares) is conditional on the borrowing being accounted for on such a basis.

Currently, the meaning of the term “amortised cost basis of accounting” for tax purposes, is not directly linked to the accounting definition. However, the introduction of new GAAP accounting standards, with mandatory effect for most companies for periods beginning on or after 1 January 2015, has led to uncertainty. 

In response, Finance Bill 2015-16 amends the rules on loan relationships to substitute a new definition of an “amortised cost basis of accounting”—a definition that is directly linked to the accounting meaning and applies to loans entered into in periods beginning on or after 1 January 2016. Transitional relief is provided for certain loans.

 

Read a November 2015 report [PDF 868 KB] prepared by the KPMG member firm in the UK: Weekly Tax Matters (13 November 2015)

 

Other topics described in this report include:

  • UK Patent Box consultation
  • EU Savings Directive repealed
  • Indirect tax decisions concerning restructuring arrangements and the exempt right to participate in bingo
  • International standard for collection of VAT on cross-border sales
  • Tax treatment for NHS surcharge

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