Transcript Slide 1

Calling all employers
Employment Tax and Pensions workshop
May 2014
Today’s workshop
 Alastair Wilson - Introduction
 Mark Parkinson – Workplace Pensions
 Claire Brown – Payroll
 Clair Williams – Salary sacrifice
 Alastair Wilson – A quick 2014 Budget round up
 Questions
Before we start – Growth Vouchers
Mark Parkinson
Wealth Management & Workplace Pensions
Why has auto enrolment come about?
Six million people in the UK have no retirement savings
Auto enrolment criteria
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All employers regardless of size – 1.3m employers in UK.

Minimum income aligned to income tax threshold (£10,000 2014/15) but pay on income
earned between the lower and upper NI thresholds (£5,772 - £41,865 2014/15).

Age 22 – SPA, can opt in if aged between 16 -21 or SPA to 74. Employer contributes if
employee has qualifying earnings.

Individuals can opt in, if earning less, employer contributes on income over the lower NI
threshold.
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Optional 3 month waiting period (employee can opt in earlier and employer must pay).
The SME market
What do employers need to do?
 Provide a qualifying workplace pension scheme
 Assess workforce every pay reference period
 Automatically enrol eligible workers
 Administer opt out processes
 Provider information to employees including:
o Telling eligible jobholders they have the right to opt out
o Notifying non-eligible jobholders and entitled workers they have the right to opt in
o Notifying workers if using a postponement period
 Arrange membership of a pension scheme for entitled workers who choose to opt in
 Pay contributions to the pension scheme
 Keep records about their workers and the pension scheme
Hopefully you’re all familiar with this?
And this?
Preparing for the challenge ahead
Compliance & Employer Fines
Compliance & Employer Fines –
Dunelm Furniture Case Study
Background
Dunelm had a Staging Date of 1st April 2013. They were due to complete registration to
confirm they had complied with employer duties, by 31st July 2013.
The Pensions Regulator investigated and discovered that Dunelm had breached the rules
in several instances.
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Failure to enrol members of four weekly payroll on time. Members enrolled a month late
Failure to enrol certain members of monthly payroll on time. These members were enrolled 3 months
later
Failure to pay across to the pension provider a significant level of contributions due to the above failures
Regulatory Action
Due to the significant amount of pension contributions and in order to protect the benefits of the employees
of Dunelm, The Pensions Regulator served an Unpaid Contributions Notice pursuant to section 37 of the
Pensions Act 2008.
Outcome
Dunelm were ordered to pay across the total amount of contributions owed to members, £108,000.
The Auto Enrolment ‘Tsunami’
In 2014 around 38,000 employers will stage
In 2015 around 70,000 employers will stage
In 2016 around 450,000 employers will stage
In 2017 around 850,000 employers will stage
Source: www.accountingweb.co.uk – 30/07/2013
Staging Dates – part 1
Staff on payroll
Staging Date
120,000 or more
1 October 2012
50,000 - 119,999
1 November 2012
30,000 - 49,999
1 January 2013
20,000 - 29,999
1 February 2013
10,000 - 19,999
1 March 2013
6,000 - 9,999
1 April 2013
4,100 - 5,999
1 May 2013
4,000 - 4,099
1 June 2013
3,000 - 3,999
1 July 2013
2,000 - 2,999
1 August 2013
1,250 - 1,999
1 September 2013
800 - 1,249
1 October 2013
500 - 799
1 November 2013
350 - 499
1 January 2014
250 - 349
1 February 2014
160 - 249
1 April 2014
90 - 159
1 May 2014
62 – 89
1 July 2014
Staging Dates – part 2
Staff on payroll
Staging Date
61
1 August 2014
60
1 October 2014
59
1 November 2014
58
1 January 2015
54 - 57
1 March 2015
50 - 53
1 April 2015
40 - 49
1 August 2015
30 - 39
1 October 2015
<30 with the last with the last two characters in their PAYE reference, numbers 92, A1-A9, B1-B9, AA-AZ, BA-BW,
M1-M9, MA-MZ, Z1-Z9, ZA-ZZ, 0A-0Z, 1A-1Z or 2A-2Z
1 June 2015
<30 with the last 2 characters in their PAYE reference - BX
1 July 2015
<30 with the last 2 characters in their PAYE reference - BY
1 September 2015
<30 with the last 2 characters in their PAYE reference - BZ
1 November 2015
<30 with the last 2 characters in their PAYE reference – 02-04, C1-C9, D1-D9, CA-CZ or DA-DZ
1 January 2016
<30 with the last 2 characters in their PAYE reference – 00, 05-07, E1-E9 or EA-EZ
1 February 2016
<30 with the last 2 characters in their PAYE reference – 12-16, 3A-3Z, H1-H9 or HA-HZ
1 April 2016
<30 with the last 2 characters in their PAYE reference – I1-I9 or IA-IZ
1 May 2016
<30 with the last 2 characters in their PAYE reference – 17-22, 4A-4Z, J1-J9 or JA-JZ
1 June 2016
<30 with the last 2 characters in their PAYE reference – 23-29, 5A-5Z, K1-K9 or KA-KZ
1 July 2016
Staging Dates – part 3
Staff on payroll
Staging Date
<30 with the last 2 characters in their PAYE reference – 30-37, 6A-6Z, L1-L9 or LA-LZ
1 August 2016
<30 with the last 2 characters in their PAYE reference – N1-N9 or NA-NZ
1 September 2016
<30 with the last 2 characters in their PAYE reference – 38-46, 7A-7Z, 01-09 or 0A-0Z
1 October 2016
<30 with the last 2 characters in their PAYE reference – 47-57, 8A-8Z, Q1-Q9, R1-R9, S1-S9, T1-T9, QA-QA, RARZ, SA-SZ or TA-TZ
1 November 2016
<30 with the last 2 characters in their PAYE reference – 58-59, 9A-9Z, U1-U9, V1-V9, W1-W9, UA-UZ, VA-VZ or
WA-WZ
1 January 2017
<30 with the last 2 characters in their PAYE reference – 70-83, X1-X9, Y1-Y9 XA-XZ or YA-YZ
1 February 2017
<30 with the last 2 characters in their PAYE reference – P1-P9 or PA-PZ
1 March 2017
<30 with the last 2 characters in their PAYE reference – 84-91 or 93-99
1 April 2017
<30 unless otherwise described
1 April 2017
Employer who does not have a PAYE scheme
1 April 2017
New Employer (PAYE income first payable between 1 April 2012 and 31 March 2013)
1 May 2017
New Employer (PAYE income first payable between 1 April 2013 and 31 March 2014)
1 July 2017
New Employer (PAYE income first payable between 1 April 2014 and 31 March 2015)
1 August 2017
New Employer (PAYE income first payable between 1 April 2015 and 31 December 2015)
1 October 2017
New Employer (PAYE income first payable between 1 January 2016 and 30 September 2016)
1 November 2017
New Employer (PAYE income first payable between 1 October 2016 and 30 June 2017)
1 January 2018
New Employer (PAYE income first payable between 1 July 2017 and 30 September 2017)
1 February 2018
NEST – The government’s answer to
Automatic Enrolment
 Maximum contribution £4,600 (2014/15)
 Limited investment choice
 No transfers in or out until 2017
 0.3% annual management charge + 1.8% contribution charge
There are currently 6 different levels of access that can be given by
employers to scheme administrators:
 Read-only access
 General access
 Payment access
 Schedule access
 Enrolment delegate
 Full access
Phasing in contributions
Period (#)
Minimum
employer
Minimum
employee (*)
Tax Relief (*)
Minimum
Total
1st Oct to 30th Sept 2017
1%
0.8%
0.2%
2%
1st Oct 2017 to 30th Sept 2018
2%
2.4%
0.6%
5%
October 2018 onwards
3%
4%
1%
8%
(#) Depending on the company’s Staging Date
(*) Assuming employer pays the minimum allowed
NB – the above is based on a percentage of ‘qualifying earnings’ = NI threshold earnings
Definitions of pay
Qualifying Earnings
This definition means pension payments are based on earnings between £5,772 - £41,865
(2014/15)
Certification
9% of Basic Pay
8% of Basic Pay (Provided that basic pay accounts for at least 85% of total pay)
7% of all earnings
How are SME businesses responding?
“Bespoke”
pension
Cost
“In house” work needed
What makes Tait Walker different?
Wealth Management
advice on choice of
pensions provider
Payroll advice and
processing for
contributions tailored
for that provider
Employment tax
advice on how to
minimise the cost
Our recent implementations
Our Clients
Staff Numbers
Staging Date
Residential Care Home
635
1st November 2013
Aerospace Manufacturer
320
1st February 2014
National Charity (1)
230
1st April 2014
National Charity (2)
325
1st April 2014
Regional Legal Firm
297
1st April 2014
Manufacturing Firm
167
1st May 2014
Engineering Firm
138
1st May 2014
Distribution Firm
112
1st May 2014
Real Life Stories and Lessons
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Maintaining compliance
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Opt Ins
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Successful communication strategies
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Pitfalls of communication
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Sourcing schemes for clients
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Charge caps
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Types of queries from employees
Concluding thoughts
Automatic Enrolment is a four party project as it brings together:
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The Employer
The Adviser
The Pensions Provider
The Payroll Provider
In our role as advisers, Tait Walker can offer guidance for employers on the best way to
proceed and project manage the process using its 3 steps
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Strategy
Implementation
On-going support & Compliance
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Tax and legislation are likely to change. The information given here is based on Tait
Walker Wealth Management’s understanding of law and HMRC practice at the date of
presentation

Tait Walker Wealth Management is a trading style of Tait Walker Financial Services Ltd
which is authorised and regulated by the Financial Conduct Authority (FCA)

Automatic Enrolment is not regulated by the FCA .

Tait Walker Chartered Accountants is not regulated by the FCA.
Claire Brown
Payroll
Auto Enrolment
What will your Pension Provider do for you!
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Who will issue postponement letters?
Who will issue new joiner packs?
How will the data be uploaded?
Will data be duplicated at the start?
Is there more than 1 scheme reference?
Auto Enrolment
Scottish Widows Middleware: Assist Me
Sage (or equivalent software)
Scottish Widows – Assist Me
Assesses entire workforce
Issue Postponement letters if applicable
Auto enrol eligible workers
Calculate & deduct correct pension amounts
Export File from Sage into Assist Me
Triggers communication which will be sent out
to employees
Authorise payment and direct debit
Send opt out notifications to employer
Process Opt outs notifications
Calculate refunds and refund via payroll
Do not assume the pension provider will do everything
Auto Enrolment
The Peoples Pension Middleware: AE Hub
Sage (or equivalent software)
The Peoples Pension – AE Hub
Assesses entire workforce
Issue Postponement letters if applicable
If you don’t have Sage they will provide a
template letter for postponement
Auto enrol eligible workers
Calculate & deduct correct pension amounts
Export File from Sage portal
Triggers enrolment communication which will be
sent out to employees
Authorise payment and direct debit
Send Opt out notifications to employer
Process Opt out notifications
Calculate refunds and refund via payroll
Do not assume the pension provider will do everything
Auto Enrolment
NEST Middleware: NEST
Sage (or equivalent software)
NEST
Assesses entire workforce
Issue Postponement letters if applicable
Auto enrol eligible workers
Calculate & deduct correct pension amounts
Export File from Sage portal
Triggers enrolment communication which will be
sent out to employees
Authorise payment and direct debit
Send Opt out notifications to employer
Process Opt out notifications
Calculate refunds and refund via payroll
Do not assume the pension provider will do everything
Auto Enrolment
Planning is CRUCIAL
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Compliant software
Understanding your role
Pay reference periods & Tax months
Pay elements
Agreeing the best definition of pensionable pay
Testing Data with provider
Auto Enrolment
Pay reference period example (4 weekly payroll)
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Staging date 1 February 2014
Employer wants to postpone for the maximum 3 months
Employer assumes deferral date 30 April (End of Postponement)
Employer assumes deductions to be deducted from May payroll : WRONG!
The legislation states that contributions must be deducted from the first time the employees get
paid after the assessment date. See the example below;
Assessment date: 21st April - the first day of the 4 weekly pay reference period (PRP) that includes
the 1st May (ie. The day after the postponement period has ended)
PRP: runs from 21st April to 19th May
When do you deduct the premium? First date that an employee gets paid after the 21st April is 25th
April so despite these earnings relating to the earnings from 23rd March to 20th April, it is from this
pay that they must deduct a premium.
Auto Enrolment
Pay reference period example (4 weekly payroll)
Pay
Reference
23rd March
Period
20th April
To
Paid to employees on 25th April
Pay
21st April
Reference
25th
To
Period
19th May
End of Postponement 30 April
The legislation states that contributions must be deducted from the first pay date, after the
assessment date and as they were paid on the 25th this falls into the previous period.
Auto Enrolment
Planning is CRUCIAL
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Compliant software
Understanding your role
Pay reference periods & Tax months
Pay elements
Agreeing the best definition of pensionable pay
Testing Data with provider
Auto Enrolment
Payroll issues
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Statutory Sick Pay
Statutory Maternity Pay
Statutory Paternity Pay
Existing Pension Schemes
Employees Handbook
Record Keeping
Clair Williams
Salary sacrifice for pensions
Salary sacrifice for pensions
What is salary sacrifice?
 An agreement between an employer and employee that an element of salary will be
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sacrificed in return for employer provided benefits
… in this case – additional employer pension contribution
Pension contributions made by employees receive income tax relief therefore saving = NI
(both employer and employee) on the amount of salary sacrificed
Total required contributions set at a certain level - expected to be split between the
employer and employee but this is not prescribed
Employee proportion is subject to NI for both employer and employee
Salary sacrifice for pensions
Example based on qualifying earnings
9%
8%
Employee Balance
(subject to NI)
7%
6%
5%
Employer
Minimum
Contribution
4%
3%
2%
1%
0%
Until Oct 2017
Until Oct 2018
From Oct 2018
Until Oct 2017
Until Oct 2018
From Oct 2018
9%
8%
7%
6%
Employer
Contribution
5%
4%
3%
2%
1%
0%
Salary sacrifice for pensions
Example
 Basic rate employee currently making a net pension contribution of £400 pa
− Salary sacrifice is based on gross pension contribution of £500
− Employee NI saving = £60
− Employer NI saving = £69
 Income tax relief achieved directly via salary sacrifice
 Easy to see how savings grow as more employees sign up
Employer NI saving
10 employees = £690 pa
50 employees = £3,450 pa
 Using this example with 50 employees money saved in Y1 would cover a lot of the costs of
implementing pensions auto-enrolment
 NI saving can either:
− Increase employee’s net take-home pay (pension contributions remain the same)
− Increase the pension contribution made (take-home pay remains the same)
Salary sacrifice for pensions
Employee No.
Employee
Payments
Example pay-slip
pre salary sacrifice
Date
Units
Rate
1
2,000.00
Notional salary
Holidays Taken: 0.00
Amount Deductions
Remaining: 0.00
Totals This Period
Total Gross Pay
Gross for Tax
Earnings for NI
Employee No.
Tax Period: 1
Rate
1
2,000.00
Notional salary
Pension salary sacrifice
Example pay-slip
post salary sacrifice
Holidays Taken: 0.00
Tax Period: 1
National Insurance No.
Amount
2,000.00 PAYE Tax
-60.00 National Insurance
Remaining: 0.00
Totals This Period
Total Gross Pay
Gross for Tax
Earnings for NI
2,000.00
2,000.00
233.33
2,000.00
160.44
48.00
40.00
1,558.23
Amount Deductions
Payment Period
Employers Pension
EMPLOYER
Tax Code: 1000L Dept: 10
Net Pay
Date
Units
233.33
160.44
48.00
Totals Year To Date
2,000.00 Total Gross Pay TD
2,000.00 Gross for Tax TD
2,000.00 Tax Paid TD
Earnings for NI TD
Monthly National Insurance TD
40.00 Employee Pension TD
Employers Pension TD
Payment Method: BACS
Employee
Payments
Amount
2,000.00 PAYE Tax
National Insurance
Employees Pension
Payment Period
Employers Pension
EMPLOYER
Tax Code: 1000L Dept: 10
National Insurance No.
Totals Year To Date
2,000.00 Total Gross Pay TD
1,940.00 Gross for Tax TD
1,940.00 Tax Paid TD
Earnings for NI TD
Monthly National Insurance TD
100.00 Employee Pension TD
Employers Pension TD
Payment Method: BACS
Net Pay
221.33
153.24
2,000.00
1,940.00
221.33
1,940.00
153.24
0.00
100.00
1,565.43
Salary sacrifice for pensions
Example
Annual savings based on 30 employees earning £24k pa (median 2013 NE wage)
Annual costs based on first 3
months (i.e. no salary
sacrifice)
Annual costs after
implementing salary sacrifice
Employer NI
£64,422
£59,454
Salaries
£720,000
£684,000
Employer pension contributions @minimum % of
notional salary
£21,600
£57,600
-
-
£1,000
£1,000
£807,022
£802,054
NEST pension fees
Payroll fees
EMPLOYER COSTS
Employer saving
£4,968
Employee NI savings
£4,320
Salary sacrifice for pensions
Timings
 Pension providers are requesting that the implementation of salary sacrifice is deferred until 3-4
months after a company’s staging date so that:
− any opt-outs have been processed and reversals in respect of payroll deductions have been
reflected
− any employees remaining within the scheme 3-4 months after the staging date are likely to
continue in the pension scheme
 Deferral is possible but communication with employees becomes more complex as:
− For first 3-4 months in pension scheme employee’s take-home pay will be reduced by the
net employee pension contributions made
− When salary sacrifice commences employee’s take-home pay will be increased as the net

employee pension contribution will no longer be deducted and they will be subject to tax
and NI on the reduced gross salary (or pension contributions will increase)
Communicate to employees before staging date so set expectations and explain reason for
changes to pay-slips
Salary sacrifice for pensions
Practicalities to observe when implementing salary sacrifice
 A formal variation to the employees’ contracts of employment must be agreed
 Salary sacrifice schemes cannot reduce an employees wage < NMW or LEL
− Current NMW = £6.31ph / £11,485pa (35 hour week), Current LEL = £5,772 per annum
− For 1% pension contribution via salary sacrifice  employee > £11,600 (£11,950 – Oct
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2014)
− Most payroll software will flag ongoing
Once a salary sacrifice scheme is implemented employer only pension contributions will be paid
− Employer must notify pension provider that salary sacrifice is being operated
− Contributions must be input to pension middleware as employer contributions
− If employee contributions continue in error then pension provider will continue to claim tax
relief within pension scheme too!
The employees’ pay-slips will change - ‘Basic Pay’ is replaced by ‘Notional Pay’ from which a
contribution is taken
− equivalent to previous gross pension contributions (increasing net take-home pay)
− to result in the same net take-home pay (increasing pension contributions)
Salary sacrifice for pensions
Employee No.
Employee
Payments
Example pay-slip
pre salary sacrifice
Date
Units
Rate
1
2,000.00
Gross salary
Holidays Taken: 0.00
Amount Deductions
Remaining: 0.00
Totals This Period
Total Gross Pay
Gross for Tax
Earnings for NI
Employee No.
Tax Period: 1
Rate
1
2,000.00
Notional salary
Pension salary sacrifice
Example pay-slip
post salary sacrifice
Holidays Taken: 0.00
Tax Period: 1
National Insurance No.
Amount
2,000.00 PAYE Tax
-60.00 National Insurance
Remaining: 0.00
Totals This Period
Total Gross Pay
Gross for Tax
Earnings for NI
2,000.00
2,000.00
233.33
2,000.00
160.44
48.00
40.00
1,558.23
Amount Deductions
Payment Period
Employers Pension
EMPLOYER
Tax Code: 1000L Dept: 10
Net Pay
Date
Units
233.33
160.44
48.00
Totals Year To Date
2,000.00 Total Gross Pay TD
2,000.00 Gross for Tax TD
2,000.00 Tax Paid TD
Earnings for NI TD
Monthly National Insurance TD
40.00 Employee Pension TD
Employers Pension TD
Payment Method: BACS
Employee
Payments
Amount
2,000.00 PAYE Tax
National Insurance
Employees Pension
Payment Period
Employers Pension
EMPLOYER
Tax Code: 1000L Dept: 10
National Insurance No.
Totals Year To Date
2,000.00 Total Gross Pay TD
1,940.00 Gross for Tax TD
1,940.00 Tax Paid TD
Earnings for NI TD
Monthly National Insurance TD
100.00 Employee Pension TD
Employers Pension TD
Payment Method: BACS
Net Pay
221.33
153.24
2,000.00
1,940.00
221.33
1,940.00
153.24
0.00
100.00
1,565.43
Salary sacrifice for pensions
Communication of salary sacrifice and TW services
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Communicate salary sacrifice to employees as part of Auto-enrolment implementation
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TW can prepare a tailored employee communication booklet which explains salary sacrifice to your
employees. This will include examples of how salary sacrifice works, explains the impact of salary
sacrifice on statutory payments (e.g. redundancy, maternity, sick pay) and answer other salary
sacrifice FAQs
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TW can prepare calculations, employee letters and variations to the terms of employees’ contracts
Communicate before staging date showing difference between pre and post salary sacrifice pay-slips
TW can help the employer to communicate salary sacrifice to employees - this could include written
communications, face-to-face presentations and/or drop-in sessions for employees
The salary sacrifice scheme must be communicated to HMRC once implemented
Maintenance of scheme – e.g. new employee calculations, annual updates regarding changes to tax
rates and periodic review the pension filings submitted to the pension provider
Alastair Wilson
General updates
Hopefully you all remembered….
Employment Allowance (‘EA’)
 Eligible employers can claim up to £2k off Class 1 NIC from April 2014
 Only one employer within a charities / connected company structure can claim
EA
 Not automatic! Employer must claim via EPS
 Excluded employers include:
− employing someone for personal, household or domestic work
− allowance claimed by a connected company or charity
− public authorities (local, district, town and parish councils)
− functions provided either wholly or mainly of a public nature (unless charity)
− Personal and Managed Service Companies who pay contract fees instead of
wages and salaries
General updates from the Budget
Benefits and expenses reporting

Office of Tax Simplification - proposals to simplify dealing with taxable benefits
1.
2.
3.
4.
5.
6.
Voluntary payrolling of taxable benefits
PSAs – employers to settle any tax liability on benefits and expenses
An exemption for qualifying business expenses paid for or reimbursed by an employer
Abolition of the £8,500 threshold
Simple ‘principles based’ definition of a trivial benefit, incorporating a per item cap (e.g. £50)
Travel and subsistence - clarification regarding permanent workplaces, homeworking, scale rate
subsistence payments and updates to HMRC guidance
7. Simplifying NICs – 2 suggestions:
− apply Class 1 NICs to all employee remuneration (whether cash or benefits in kind)
− alignment of the underlying definitions of income and expenses for income tax and NI
8. This would represent a fundamental policy review
− But the employer must still know what is and what is not a taxable benefit?
− whether the way a benefit is provided should determine how much tax is paid on it
− whether non-taxable items can be excluded from charge to tax
Any Questions?
Next workshop will be in September…..