Power to make temporary changes to the taxation of employment income


Who is likely to be affected

Employees who receive certain in-kind benefits or expenses from their employer during a disaster or emergency of national importance.

General description of the measure

This will allow the HM Treasury, under the direction of the Minister, to make regulations to make temporary changes to Parts 3, 4 and 5 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) for a period of up to 2 tax years in the event of a disaster or emergency of national significance as determined by Her Majesty’s Treasury. This will allow the government to support taxpayers, for example by:

  • Exemption from income tax of benefits in kind of a specific designation, if applicable
  • Modification of the conditions for granting exemptions on benefits in kind
  • Exemption from specified refunds of income tax
  • Offer relief for certain expenses

Policy objective

Enable the government to quickly and effectively support taxpayers in the event of a disaster or emergency of national significance.

Context of the measure

COVID-19 has highlighted the limited scope of making changes to the current tax regime for in-kind benefits and expenses to respond quickly to the pandemic. The government had to introduce primary and secondary legislation with temporary effect to respond to the pandemic, to exempt a number of benefits in kind, to modify the conditions for granting certain benefits and to grant relief for specific expenses and reimbursements.

It is expected that during any future disaster or emergency of national significance, it may be necessary to make similar changes on a temporary basis. Current legislation only allows changes to be made through secondary legislation in limited circumstances.

Therefore, in order to be able to respond effectively to disasters or emergencies of national significance like COVID-19 in the future, the government will introduce regulatory powers that will allow Her Majesty’s Treasury to respond quickly to various emergencies, including, but not limited to, pandemics, if deemed necessary.

Detailed proposal

Effective date

This measure will take effect from the date of royal assent of the 2021-22 finance bill.

Current law

There are only limited circumstances in ITEPA which allow changes to the rules of income tax in kind and expenditure via secondary law to deal with emergency situations.

Part 3 of ITEPA refers to employment income: earnings and benefits treated as earnings. The HM Treasury may exempt benefits in kind which are subject to income tax under Chapter 10, Part 3 of ITEPA and who are considered “minors” using secondary legislation by virtue of the powers contained in Article 210 of ITEPA. Ministers cannot exercise this power to exempt payments or benefits that are not considered “minor”.

In certain special circumstances, the HM Treasury may also use regulations to modify the eligibility conditions of certain exemptions to in-kind benefits and expenses (such as under section 318D which contains a power for HM Treasury to modify the amounts which are exempted in article 318A, or to modify articles 318 to 318C relating to the eligibility conditions related to childcare services).

Any further change would most likely require the use of primary legislation, making it difficult to introduce temporary changes at a rapid pace, especially in an emergency.

Proposed revisions

Legislation will be introduced in the Finance Bill 2021-22 which will grant His Majesty the Treasury the power to make regulations, under ministerial direction, in the event of a disaster or emergency of national importance.

The HM Treasury can determine when it is appropriate to use powers, but can only make temporary changes to parts 3, 4, and 5 ITEPA (which includes the power to make consequential amendments to income tax laws).

Any change in the exercise of the new powers would only have effect for a limited period of time, as set out in any regulation made under the new power. In any case, the changes must cease to have effect at the end of the taxation year following the year in which they first took effect (and will therefore only remain in effect for a period of maximum of two full tax years). However, the new powers can be exercised to make similar arrangements, if necessary, to extend any taxpayer relief measures for an additional period during which an emergency or disaster has an impact, or in connection with a new disaster or emergency.

Power can only be exercised in a way that fully relieves the taxpayer and cannot be used to create a tax burden.

Summary of impacts

Impact on the board (£ m)

2021 to 2022 2022 to 2023 2023 to 2024 2024 to 2025 2025 to 2026 2026 to 2027
nothing nothing nothing nothing nothing

This measure should not have an impact on the chessboard.

Economic impact

This measure is not expected to have significant economic impacts.

Terms used in this section are defined in accordance with the Office for Budget Responsibility Indirect Effects process. This will apply when, for example, a measure affects inflation or growth. You can request more details about this measure at the email address provided below.

Impact on individuals, households and families

This measure does not introduce immediate changes in the tax system and is therefore not expected to have an impact on individuals, households and families.

The measure allows for future changes that may impact individuals, households and families, however, the impact is likely to be positive as the changes will be totally relieved.

The customer experience should stay the same overall because it doesn’t change the way people interact with HMRC.

This measure should not affect the formation, stability or breakdown of the family.

Further consideration will be given if the powers are used to introduce changes.

Impacts on equality

This measure does not introduce immediate changes in the tax system and it is therefore not expected that there will be any impacts for people belonging to groups sharing protected characteristics.

Impact on businesses, including civil society organizations

This measure does not introduce immediate changes in the tax system and it is therefore not expected that there will be any impacts on businesses and civil society organizations.

The measure allows for future changes that may impact businesses, however, the impact is likely to be positive as the changes will be fully relieved, thus removing the reporting requirements for employees who receive an in-kind benefit or benefit. relevant expense. Such changes would likely have a one-time familiarization cost.

In the event of future changes under the new powers, the customer experience is expected to remain broadly the same, as the powers can only be used for the purpose of complete relief.

There should be no impact on civil society organizations.

Further consideration will be given if the powers are used to introduce changes.

Operational impact (£ M) (HMRC or other)

This measure does not introduce immediate changes in the tax system and therefore it is not expected that there will be operational impacts on HMRC.

If there are any future changes under the new powers, the impacts will depend on the nature of the disaster or emergency, the government’s response and the secondary legislation it is proposed to pass. We anticipate that the operational impacts will remain broadly the same, as the powers can only be used for the purpose of full relief.

Further consideration will be given if the powers are used to introduce changes.

Other impacts

The impacts will depend on the nature of the disaster or emergency and how powers are used to support employees, but none have been identified to date.

Further consideration will be given if the powers are used to introduce changes.

Monitoring and evaluation

The policy will be subject to ongoing review through communications with affected taxpayer groups.

Additional tips

If you have any questions about this change, please contact the Employment Income Policy team by email: employment [email protected]


Source link

Previous How the pandemic made us more adventurous drinkers
Next Botswana Defense Force C-130 damaged by LAM aircraft in Pemba

No Comment

Leave a reply

Your email address will not be published. Required fields are marked *