Employees
Company cars and fuel (Table C)
The complications of owning a company car continue, with rules announced in previous years coming into force and current announcements of changes to take effect later.
For 2014/15, the percentage of the original list price which is charged as the cash equivalent of a company car will increase by 1% for all vehicles with CO2 ratings between 76g/km (which increases from 10% to 11%) up to 210g/km (where the maximum 35% will be reached – previously 215g/km). Only zero-emissions cars (no charge) and those with very low emissions (up to 75g/km, charged on 5%) are held at the same percentages as for 2013/14.
Further increases have been published going forward into 2018/19, so anyone choosing a new company car now can work out the tax effect of a current decision until they are likely to change it. By 2018/19, a car emitting 0 to 50g/km will be taxed on 13% of the list price, and one emitting 180g/km or more will be taxed on 37%.
The taxable benefit of free fuel provided for use in a company car is calculated by multiplying a fixed figure by the same percentage. This will increase for 2014/15 to £21,700 (2013/14: £21,100), so for many employees the taxable amount for fuel will increase for two separate reasons – the percentage and the amount.
Making good a benefit
Where an employee makes a payment to the employer as a condition of having a company car for private use, the taxable benefit is reduced. The law has been changed to make it clear that from 2014/15 any such payment is only effective if it is made before the end of the tax year in which the private use took place – it will not be possible to extinguish a tax charge later, typically following a PAYE investigation which has disclosed unreported benefits. A similar change applies to the charge on employer-provided vans.
Employee loans
It has been confirmed that the threshold below which low-interest employee loans are not charged to tax will increase to £10,000 from 6 April 2014. For loans above that, the taxable benefit for 2014/15 will be calculated using an official interest rate of 3.25%.
Employee medical expenses
An exemption from income tax and NICs of up to £500 is to be introduced later in 2014 covering the provision of recommended medical treatment to help an employee return to work after a period of absence through sickness or injury. Relief covers the payment or reimbursement of treatment costs.
Employee share schemes
As previously announced, the maximum value of shares that can be issued to employees under an approved all-employee Share Incentive Plan (SIP) is increased from Royal Assent to the Finance Bill (usually at the end of July). The employer can issue up to £3,600 (up from £3,000) of ‘free’ shares to employees, who can also purchase up to £1,800 (up from £1,500) worth of ‘partnership’ shares from their gross pay.
Among other changes to encourage employee share ownership, tax incentives are being introduced for certain employee ownership trusts. These include relief from CGT on gains accruing on the disposal of shares in a trading company to a qualifying trust which acquires control of the company and operates for the benefit of all employees, and an exemption from income tax of £3,600 for certain payments made to employees of qualifying employee-owned companies.