OTS Review of Expenses and Benefits – Progress
At the Autumn Statement of 2012, the Government indicated it was to ask the Office of Tax Simplification (OTS) to review ways in which the benefits and expenses taxation system and employee termination payments process could be simplified.
In April 2013, David Gauke MP, Exchequer Secretary to the Treasury, set out the terms of reference for the review, saying that the vision was to complete the work in three stages:
- A fact-finding exercise aimed at identifying the main areas of complexity
- A review of these specific areas with a view to developing recommendations for simplification
- A study of other areas of the ITEPA Benefits Code, looking at areas for simplification and modernisation
A thorough examination of industry practices and experiences was undertaken and, in August 2013, the OTS produced Stage 1 of their project entitled ‘Review of Expenses and Benefits: Interim Report’. Amongst other recommendations, their report documented 43 ‘Quick Wins’ that were identified as things that could be changed relatively quickly with positive impacts. These are detailed below:
|
No |
Area |
Detail |
Legislation? |
|
1 |
Benefits |
HMRC to encourage voluntary payrolling of benefits, in place of reporting benefits on forms P11D |
Yes |
|
2 |
Benefits – Accommodation |
HMRC to review published list of employments where it is “customary” to get accommodation |
No |
|
3 |
Benefits – Broadband |
HMRC to allow home broadband costs to be subject to PSAs |
Yes |
|
4 |
Benefits – Cars |
Allow car fleet operators to buy multi-year road fund licences |
No |
|
5 |
Benefits – Car Fuel |
Exempt electricity for electric cars from the benefit rules |
Yes |
|
6 |
Benefits – Car Fuel |
Car fuel benefit should be based on what you put in your tank, not how you pay |
Yes |
|
7 |
Benefits – Car Fuel |
Allow reimbursement of car fuel where employee contributes by 6 July |
Yes |
|
8 |
Benefits – Cycle schemes |
Carry out a proper evaluation of the cycle schemes success and look for ways of streamlining its administration |
Yes |
|
9 |
Benefits – Long Service Awards |
Bring the minimum length of service down to five years |
Yes |
|
10 |
Benefits – Long Service Awards |
Allow the exemption to apply if there has been a previous award unless that was within five years |
Yes |
|
11 |
Benefits – Trivial |
HMRC should publish a list of benefits they consider to be trivial, presumably with limits on the amounts |
No |
|
12 |
Expenses – Mileage Rates |
Align tax and NICs treatment of mileage rates over 45p |
Yes |
|
13 |
Expenses – Mileage Rates |
HMRC should not require retention of fuel VAT receipts for expense claims where only a mileage rate has been claimed |
No |
|
14 |
Expenses – Subsistence Rates |
HMRC should give better guidance on what qualifies for subsistence expenses |
No |
|
15 |
Expenses – Subsistence Rates |
HMRC should reinstate the practice of having a ‘friends and family’ scale rate |
No |
|
16 |
Expenses – Travel and Subsistence |
HMRC should commit to revising and updating the booklet 490 to fit better with modern working patterns |
No |
|
17 |
Expenses – Travel |
HMRC to publish guidance on temporary workplace rules for projects carried out in phases |
No |
|
18 |
Expenses – Travel |
HMRC should stop treating London as one workplace regardless of travel time |
No |
|
19 |
Expenses – Removal |
Why do these need to be entered in three different places on the form P11D? Once is enough |
No |
|
20 |
Expenses – Removal |
Remove the 5 April requirement in s274 ITEPA: change it to ‘within X months of commencing new duties’ |
Yes |
|
21 |
Termination Payments |
HMRC to review its policy on “auto PILONS” |
No |
|
22 |
Termination Payments |
Simplify rules for overseas employees |
Yes |
|
23 |
Termination Payments |
Improve HMRC guidance regarding the operation of the OT tax code in relation to termination payments, and the timing for issuing the P45 |
No |
|
24 |
Termination Payments |
Allow a single return of continuing benefits given on termination where these are provided for a set period of up to two years |
No |
|
25 |
HMRC Admin |
Employers should be able to sort out straightforward employee tax issues with HMRC if the employee gives consent |
Yes |
|
26 |
HMRC Admin |
Introduce a process where tax codes with fixed expense allowances are reviewed when employments change |
No |
|
27 |
HMRC Admin |
Improve communication between HMRC officers dealing with employer and employee |
No |
|
28 |
HMRC Admin |
Improve guidance and design of Form P11D, for example state that you need a different form if the employee earns less than £8,500 |
No |
|
29 |
HMRC Admin |
Introduce facility to re-submit forms P11D and P11D(b) online |
No |
|
30 |
HMRC Admin |
Add a box to the P11D to tick if the benefit is just for one year |
No |
|
31 |
HMRC Admin |
Allow voluntary notification of in-year changes to benefits |
No |
|
32 |
HMRC Admin |
HMRC to improve guidance on allowable expenses |
No |
|
33 |
HMRC Admin |
HMRC to allow all types of expenses claims to be made on one form, or online |
No |
|
34 |
HMRC Admin |
Improve web-site guidance and cross referencing, for example keep the What’s New pages up to date |
No |
|
35 |
HMRC Admin |
HMRC should publish a list of standard items and conditions that will always qualify for dispensations |
No |
|
36 |
HMRC Admin |
Allow dispensations to be made for a tax year by 6 July of the following year (the P11D deadline) |
Yes |
|
37 |
HMRC Admin |
HMRC should make it clear that they allow PSAs to be made for overseas employees and non-doms |
No |
|
38 |
HMRC Admin |
The online dispensation process should be publicised and made available to all employers |
No |
|
39 |
HMRC Admin |
Allow adjustments in relation to AMAP reimbursements to be submitted online |
No |
|
40 |
HMRC Admin |
HMRC to improve guidance and awareness of dispensations and PSAs |
No |
|
41 |
HMRC Admin |
HMRC to improve layout and design of Form P87 for claiming expenses |
No |
|
42 |
HMRC Admin |
HMRC should reintroduce voluntary use of form P46 (car) when a car is replaced |
No |
|
43 |
HMRC Admin |
Provide a link to HMRC’s website guidance for new employers when they first register |
No |
On 14 October 2013, the OTS published their ‘Progress Report on Quick Wins’ saying that David Gauke had confirmed his support for progressing the priority areas outlined in the Interim Report and for taking forward the quick wins that it identified.
In response to the Interim Report, HMRC confirmed that some of the wins had already been implemented. This, in itself, was a concern to the OTS, who had based their report on feedback from professionals. This indicated that, whilst HMRC may say they have implemented them (or they are already in place), the communication of this fact has been poor.
The Autumn Statement 2013 report said that the Government had already implemented 4 of the Quick Wins:
- 7 – to allow the reimbursement of car fuel by 06 July to prevent a fuel benefit charge arising
- 29 – the ability to submit amended P11Ds and P11D(b)s online
- 42 – allowing voluntary use of the P46(Car) when a car is replaced
- 43 – providing new employers with a link to the relevant sections of HMRC’s Website to raise awareness of expenses and benefits issues
However, as the OTS commented in their 14 October 2013 Interim Report, the fact that these were raised as issues in their report suggests that HMRC have not been proactive in communicating this.
The Autumn Statement 2013 report also identified a further 9 Quick Wins to be implemented by the end of January 2014:
- 2 – HMRC to publish a list of employments where it is ‘customary’ for accommodation to be provided
- 11 – HMRC to publish a list of benefits which they consider to be trivial, presumably with limits on the amounts
- 23 – improving guidance regarding the operation of 0T in relation to termination payments and the timing for issuing the P45
- 34 – improving HMRC’s Website guidance and keeping ‘What’s New’ up-to-date
- 37 and 40 – improving general guidance on dispensations and PSAs, including the availability of PSAs for overseas employees and non-domiciles
- 35 and 38 – raising awareness that there is a list of standard items and conditions that will always qualify for dispensations and raising awareness of the online application process
- 42 – raising awareness that it is possible to voluntarily use the P46(Car) when a car is replaced
The Government will consider a further 10 by the end of this Parliament and will consider the OTS’s final recommendations ahead of Budget 2014 on receipt of its final report.
Further Information
- Payroll Help 21 August 2013 – OTS Review of Expenses and Benefits
- Gov.uk – Progress on Quick Wins
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