EMPLOYMENT ISSUES
Company cars and the fuel scale charge
Where a 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 currently discounts 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.
If free fuel is provided 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 figure has not changed since
it was introduced in 2003. This 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.
Employers should seriously consider whether the
fuel benefit is worth maintaining, as the associated Class 1A payable by
employers on benefits in kind will also go up.
National Insurance Contributions (NICs)
In the last Pre Budget Report, all of the NIC rates
were announced for the forthcoming year but, this year, no rates at all were
announced!
In this year’s Budget, significant proposed
changes to the limits between which NICs are payable were announced. For
2008/09 the upper earnings limits (UEL), above which employees continue to pay
contributions of 1% on earnings, will be increased by £75 per week above
indexation.
The upper profits limit for Class 4 national insurance
for the self-employed will also be increased in 2008/09 by £75 per week
above indexation.
In the following year the upper earnings limits will
be aligned with the point at which the higher rate of income tax becomes
payable.
Comment
The government claims the increases in national
insurance are aimed at simplifying the tax system but it comes at quite a cost
to employees and the self-employed.
Other NIC changes
Under an exemption that has existed since at least the
1960s, employers in the construction industry can pay into a third-party pooled
holiday pay scheme, from which employees receive their holiday pay. There is no
liability to deduct employer and employee NICs on that payment.
HMRC have become aware that this exemption is being
used by large employers of workers outside the construction industry, putting
significant amounts of revenue at risk. From 9 October 2007, the exemption is
withdrawn for all businesses but the construction sector. For the construction
sector, a five year transitional period will be introduced before the exemption
is withdrawn completely on 30 October 2012. |
