The argument about how good or bad the Autumn Statement was for the country rumbles on and will probably do so until something more interesting captivates the national press, the UK weather will no doubt achieve that, says Helen Hargreaves.
For those of us in payroll we have some confirmation of the 2014 Budget announcements, a few tweaks to the figures, extensions to the employment allowance and employer’s exemptions plus some welcome decisions on the benefits in kind improvements.
Personal allowances
The main personal allowance was set to increase to £10,500 a year from 6 April 2015. We expected it to go up a lot more given that 2015 is election year, however we got an extra £100.
The higher rate threshold, however, was cut by just £80, instead of the usual basic rate taxpayers benefit only rule.
It also means the transferrable tax allowance for married couples, due 6 April 2015, will be £1,060.
The Pensions Regulator is consulting on aligning the automatic enrolment threshold with the personal allowance so let’s hope this decision is made and legislated in time for April 2015.
We can also expect consultation concerning restricting personal allowances for non-residents. It’s an important but complex issue so change is unlikely before April 2017.
National Insurance contributions
No change to the rates of National Insurance was either expected, or announced, however the thresholds and limits will do.
The lower and upper earnings limits are aligned with the value of the basic state pension and the higher rate tax threshold of £42,385.
Employment allowance
Introduced in April 2014, this was not given to public sector bodies or anyone employing nannies or personal care workers.
It has now been extended, from April 2015, to those employing personal care workers and while this is welcomed, campaigners will continue to press for those employing nannies to be included.
Employer’s National Insurance contributions
From 6 April 2015 employers are exempt from paying the secondary contribution for all employees under the age of 21. This gives us seven new NIC categories for a year before losing three when contracting out goes.
From April 2016, this exemption extends to employers with apprentices under the age of 25. Will this be accommodated within the seven new categories? Probably not but we can but hope.
Note the wording, it applies to all employees under 21 and all apprentices under 25. As soon as an employee is 21 or an apprentice is 25 the employer ceases to be eligible for exemption. Alan Sugar beware, read the small print to avoid non-compliance.
Employers need to be ready for an announcement on the recovery of apprenticeship training costs soon. One proposal is for employers to self-reimburse via the EPS and professional bodies have been fighting hard to prevent it. The exemption of employers NIC for apprentices may have just swung the argument to the EPS.
Taxation of benefits in kind
Many readers will have contributed to the extensive consultation exercise on benefits in kind in the summer of 2014, despite their workload, and the statement rewarded that effort by placing some of the proposed changes on the statute books for 2015 and others for 2016.
This is welcome news, however they are also small beginnings to what will be an extensive set of changes to the processing of benefits in the future.
From April 2015 we will have a statutory level of trivial benefit for the first time which will replace the informal system many have operated for many years. While this is an excellent development, the disappointment is that it has been set at £50 rather than the £75 that had been proposed by the CIPP and many of the professional bodies.
Nevertheless, the complex set of limits proposed by HMRC seem to have been withdrawn so that we are left with a simple limit to work with.
We will have to wait for April 2016 before the next set of changes comes into force, firstly the removal of the £8,500 threshold for reporting benefits, effectively abolishing the P9D. There are safeguards being put in place to protect some low earners from the effects of being assessed for income tax for the first time.
In the same tax year we will also get our long awaited statutory right to operate payrolling of benefits in kind, hopefully without the need to obtain prior approval or the requirement to submit a summary of the benefits payrolled. Employers do need to take into consideration though that at any time in a tax year they may be asked to provide a valuation of benefits for the Universal Credit system. That’s something which hasn’t received much publicity.
The final item in the statement on benefits in kind refers to the need for a simpler exemption for reimbursed expenses, again long overdue, however the travel and subsistence review, where most reimbursed expenses come from, is set to continue.
Construction industry scheme
The long awaited responses to the summer consultation exercise are still awaited, however we now have a commitment to implement some much needed improvements. Expect early on-line mandation for large business, faster and easier verification of sub-contractors and self-assessed verification to allow immediate use of a sub-contractor as part of the new measures.
Direct recovery of debt
Subject to much criticism and last minute changes, this controversial measure is to be implemented but with welcome safeguards to ensure it is not abused by HMRC.
The Chancellor made it clear that at least one face-to-face meeting will be included in the new system and ensuring judicial oversight is included in the legislation to provide some comfort to practitioners.
Summary
Anyone expecting a pre-election give away would have been sorely disappointed in this Autumn Statement, and barring unforeseen economic recovery between now and the Budget it is unlikely there will be big changes to these announcement.
We welcome the additional amount on the personal allowance but worry that it takes more people out of automatic enrolment, the very people it was supposed to help.
We especially welcome some long overdue improvements to the support to small business now that the PAYE process has just become a lot more complex, however, those measures are limited and unlikely to be of much help.
Helen Hargreaves is a senior policy and research officer at the CIPP.