COVID tests and working from home
A number of relaxations of the rules relating to the pandemic, introduced in 2020/21, will continue into 2021/22. These include exemptions from taxable benefit charges on reimbursement of COVID tests by employers and the provision of relevant equipment to enable employees to work from home. The conditions for the Cycle to Work scheme, which require a bicycle to be mainly used for commuting or work journeys to avoid an Income Tax charge, have also been relaxed for employees who were provided with a bicycle by their employer before 20 December 2020.
Company cars and fuel (Table C)
The basis for taxing company cars and fuel provided for private use is set out in the Table. No changes were made to the rates announced for car benefits in previous years, so cars first registered after 5 April 2020 will see their benefit charge rise by one percentage point. Note that fully electric cars gave rise to no tax charge in 2020/21, but there will be a charge on 1% of their list price in 2021/22, increasing to 2% in 2022/23.
There have also been changes to the taxable figures for vans with private use, including removing the taxable benefit on zero-emission vans with effect from 6 April 2021.
‘Off payroll’ working
HMRC has been concerned about individuals working through personal service companies (PSCs) for two decades: they regard this as a way of avoiding PAYE and Class 1 NIC where ‘in reality’ (in HMRC’s view) the individual is acting as an employee.
The ‘IR35’ rules require PSCs to pay PAYE and NIC on income from engagements that are effectively employments. From 6 April 2017, where the individual behind the PSC works in the public sector, the responsibility for paying this tax was transferred to the person paying the PSC, and the responsibility for deciding ‘what is effectively employment’ was imposed on the public sector engager. HMRC is convinced that this has reduced non-compliance and intended to extend the same rules to large and medium-sized engagers in the private sector from April 2020. Because of the pandemic, this was delayed to 6 April 2021. Only technical amendments to the rules were announced in the Budget, so this will be introduced as planned.
This is a very significant and potentially contentious change for all those who work through, and those who contract with, PSCs. It will be important to understand the decisions that have to be made, who has the responsibility for taking them, and what to do if the parties to a contract do not agree about its status.
Enterprise Management Incentives
EMI scheme participants must meet a minimum working time commitment of either 25 hours per week or 75% of total working time, subject to a small list of exceptions. Due to the COVID-19 pandemic, many workers are on reduced hours or furlough and would therefore break the condition.
A time-limited easement of this rule, running from 19 March 2020 until 5 April 2022, applies where employees have not met the working time requirement as a result of coronavirus. It ensures that participants are not forced to exercise their options earlier than planned and also guarantees that participants can be granted qualifying options during the pandemic.