Employment Taxes

Anti avoidance

Two tax avoidance schemes for employees have been blocked. The first, announced on 13 January 2009, involving the creation of employment income deductions in relation to insurance against employment related liabilities has been blocked by including a "motive" test in the relevant legislation. The second relates to reducing the benefit in kind on employer provided accommodation by paying an up front lease premium followed by reduced rents. The benefit in kind will now include an element of the premium spread over the life of the lease.

Comment: These rules are unlikely to have wide application but are further evidence of the Treasury’s continuing fight against tax avoidance.

Company cars

The calculation of the benefit in kind in respect of employer provided cars will be amended with effect from 2010-11. The benefit is based on a proportion of the list price of the car in question with the proportion being based on the CO2 emission of the car. Cars with emissions under 130 g/km have a benefit of 15% of list price. This rises at 1% per 5 g/km to a maximum of 35%. There are various reductions for cars with very low emissions and cars running on alternative fuels or electricity.

From 2010-11 the lower emissions limit will be reduced to 125 g/km CO2. The various exemptions for alternative fuels will be withdrawn and the benefit will be based simply on the CO2 emissions. Electric cars will continue to have special treatment with a benefit calculated at a rate of 9%. Furthermore, the £80,000 limit on the list price of cars for benefits purpose has been removed.

Comment: This is a simplification of the current rules, which is welcome. However, the removal of the upper limit of £80,000 will increase tax for employees with high-value cars.