Employment Issues
National Insurance Contributions (NICs)
There is no change in the rates of NIC. For 2008/09
the upper earnings limit, above which employees continue to pay contributions
of 1% on earnings, will be increased by £100 per week. This gives an
annual figure of £40,040.
The upper profits limit for Class 4
national insurance for the self-employed will also be increased in 2008/09 to
£40,040.
In 2009/10 the upper earnings and profits limits will
be aligned with the point at which the higher rate of income tax becomes
payable.
Comment
For many this increase in the contributions for employees and the
self-employed removes the tax savings given by the reduction in basic rate of
income tax. |
Company cars and the fuel scale charge
Where a company car is provided for an
employee’s private use, a taxable benefit arises which is based on the
list price of the car and its CO2 emissions. The percentages range from 15% to
35% for most cars. There are discounts currently available for environmentally
friendly cars and from 6 April 2008 there will be:
- a 2% discount for cars that have been manufactured
to run on E85 fuel
- a new 10% company car tax band for non-electric
cars emitting no more than 120gm/km of carbon dioxide. Environmentally friendly
discounts do not apply to such cars but the diesel supplement does.
If free fuel is provided with a company car for
private motoring then a fuel benefit tax charge arises based on the percentage
used for the car benefit and a ‘multiplier’, which is currently
£14,400. For 2008/09 the figure will increase to £16,900.
Comment
The fuel scale charge multiplier has not changed since it was
introduced in 2003. This 17% rise, combined with an increase in the car benefit
percentages for 2008/09, means that many employees will see a substantial
increase in their tax bills from next April. |
Longer term the government is proposing:
- the starting point for the company car benefit will
be reduced by 5gm/km to 130gm/km in 2010/11
- the incentive to drive fewer miles will be
strengthened by increasing the fuel benefit charge at least in line with the
Retail Prices Index from April 2009.
Tax free mileage allowances
The government has been consulting on changing the
system and rates for tax free mileage allowances where an employee uses their
own car for business purposes. It has been decided that the system will not
change and the rates will be maintained at current levels. The current rates
are:
- business mileage up to 10,000 miles – 40p
- business mileage above 10,000 miles – 25p.
Enterprise Management Incentive (EMI)
EMIs are tax and NIC advantaged share options
available to small companies with gross assets not exceeding £30 million,
to help them recruit and retain employees. Currently employees cannot hold
qualifying EMI options, taking into account Company Share Option Plan options
also granted to them, with a total market value of more than £100,000 at
date of grant.
Regulations will be made to increase the individual
employee limit on grants of EMI qualifying options from £100,000 to
£120,000. The change to the individual EMI option grant limit will have
effect in respect of options granted on or after 6 April 2008.
To
ensure compliance with EU State Aid guidelines, legislation will be introduced
in the Finance Bill to make two changes:
- EMIs will be limited to qualifying companies with
fewer than 250 full time employees
- companies involved in shipbuilding, coal and steel
production will no longer qualify for EMI.
Residence and domicile: changes for employment
related securities
Employment related securities and securities options
are shares and other securities, and options over such shares or securities,
which are acquired by an employee by reason of their employment.
Employees who are not resident and not ordinarily resident in the UK at the
time employment related securities or options are acquired are not within the
scope of all of the charging provisions. Changes will be introduced in the
Finance Bill to bring such employees within all the charging provisions so that
their remuneration from employment related securities or options is subject to
the same rules as other employees.
Where such employees are taxed on
the remittance basis, the measure will provide apportionment of the employment
related securities income to ensure that the proportion relating to overseas
duties will only be subject to income tax when it is remitted to the UK.
A similar apportionment basis will be available to non-domiciled
individuals where the relevant income relates to a foreign employment where the
duties are performed wholly outside the UK.
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