NPS P11D Update
We have now switched back on the P11D interface and your employees, pension annuitants and clients will now begin to receive P800s and payable orders. Further updates will follow.
Summary of Draft Clauses of the Finance Bill 2011
Income Tax Allowance and Basic Rate Limit
- The personal allowance for under 65s will increase by £1,000 in 2011-12 to £7,475
- The basic rate limit will fall by £2,400, taking it to £35,000. This means the higher rate threshold (equal to the sum of personal allowance and basic rate limit) falls by £1400 to £42,475
- All income tax rates for 2011-12 will remain at their 2010-11 levels
Changes to Tax Reliefs for Employer-Supported Childcare
Where employers offer employer-supported childcare schemes providing childcare vouchers or directly contracted childcare, up to £55 per week on what would otherwise be a taxable benefit is subject to a tax exemption and associated NICs disregard. Higher rate and additional rate taxpayers receive a greater degree of tax relief on the amount, and Ministers have decided to reform this relief so that all those joining schemes on or after 6 April 2011 receive approximately the same level of tax relief.
This will be achieved by reducing the monetary value of the tax exemption for higher rate and additional rate taxpayers to £28 per week and £22 per week respectively. Draft legislation was published on 9 December 2010. Legislation will be introduced in FB 2011.
Employer-Supported Childcare: Changes to the "Open Generally" Condition
Currently the tax exemption and NICs disregard for ESC schemes only apply if a number of conditions are met. One of these conditions is that the scheme must be open generally to employees. Where ESC is offered through salary sacrifice, working parents who earn at or near the National Minimum Wage (NMW) levels cannot join their employer’s scheme. This is because legislation prohibits deductions from a person’s salary or earnings if the result is that they are paid less than the NMW.
The amendment will allow employers to make their ESC schemes unavailable to those employees earning at or near NMW levels.
Support for those earning at or near NMW levels who cannot join employer-supported childcare schemes will normally be available through the childcare element of Working Tax Credit.
PVGS registration fee
The Protecting Vulnerable Groups Scheme (PVGS) is a new vetting scheme for employees in Scotland who work with children and vulnerable adults. Employees registering under PVGS will be required to pay a registration fee.
- This measure introduces a new income tax relief where an employer pays or reimburses the PVGS fee on the employee’s behalf.
- In the absence of this measure there would be a taxable benefit for what is, in effect, a mandatory fee.
- The amount of relief per person is very small. The PVGS fee is expected to be £59 and so relief for a basic rate taxpayer would be £11.80 (it is not a recurring annual fee)
Restricting pension’s tax relief
Legislation is introduced in Finance Bill 2011 to restrict pensions tax relief for individuals by reducing the annual allowance (AA) to £50,000 (from £255,000), from April 2011, and the lifetime allowance (LTA) to £1.5m (from £1.8m) on or after 6 Apr 2012. Transitional rules for the AA have effect on and after 14 Oct 2010.
Removing the effective requirement to annuitise by age 75
This measure removes the requirement for savings in a registered pension scheme to be used to secure an income by age 75. The existing rules create an effective requirement to purchase an annuity by age 75.
Enabling Retirement Savings Programme-Pensions Taxation
The legislation will:
- Remove the tax charge on borrowing linked to the cost of establishing, managing or administering the National Employment Savings Trust (NEST);
- Remove the tax liability on any interest payments an employer is required to pay to a jobholder’s pension account because contributions were paid late
Security for PAYE and NICs at risk
This measure will allow HMRC to require a security from employers where there is serious risk that tax due under PAYE or Class 1 NICs will go unpaid. The proposal will not affect employees or the PAYE and NICs that they pay, and will support the Government’s aim of supporting those who try and get their tax right but coming down hard on those employers who are deliberate rule breakers.
Scheme Transfers, Merges and Successions
In our last Weekly Update Number 41 we told you about guidance around Scheme transfers, mergers and successions. This message should have made clear that this is proposed guidance where we would welcome your comments before the guidance is made more widely available.
Customer Address Changes
As we are currently issuing large numbers of tax calculations to customers and these may involve payable orders where they have overpaid tax for the years 2008/9 and 2009/10. I would appreciate it if you could raise awareness within your organisations that it is important for individuals to advise us of their change of address, especially if this has happened in the last two years. I have attached the link to our website, which enables individuals to notify address changes online. We do not take account of addresses on incoming employer correspondence so it is important that employees and pensioners advise us when they change their address.