Tax and National Insurance Contributions to cease on qualifying expenses payments
From 6 April 2016, there will no longer be a requirement to pay Tax and National Insurance Contributions (NIC's) on qualifying paid or reimbursed expenses payments.
What does this mean?
It means that as an employer, you will no longer have to apply for a dispensation nor will you have to report certain expenses payments on form PD11 if the employees who receive those payments are entitled to claim a fully matching tax deduction.
What if I already have a dispensation?
Your current dispensation with HMRC will no longer apply after 5 April 2016.
Will scale rates change?
Scale rates will continue to be available. You will be able to agree a bespoke scale rate with HMRC, or alternatively you can use HMRC's benchmark rates. (Scale rates are approved flat rates that you can pay your employees for a particular expense instead of reimbursing the employee's actual cost).
What if I have already agreed a bespoke rate?
If your bespoke rate was agreed after 5 April 2011, you will be able to continue to use this rate up until the 5th anniversary of your agreement without having to complete a further sampling exercise. You will be required to submit an application to continue to use your existing rates. You must also have a system in place for checking that you only make payments on occasions when your employees qualify for a deduction and have incurred an expense. The application form is available here.
Please contact our Tax Team for more information.
Whilst every effort has been made by CavanaghKelly to ensure the accuracy of the information here, it cannot be guaranteed and neither CavanaghKelly nor any related entity shall have liability to any person who relies on the information herein. Information given here is for guidance only. Detailed professional advice should be taken before acting on any information contained herein. If having read the guidance here, you would like to discuss further; a member of our team would be pleased to help you.