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Making a big difference for the future!

Simon Parsons on Budget 2010

“This Budget isn’t just about securing our recovery, but critically it’s about making the big decision for the future” stated the chancellor, Alistair Darling, “if we’re going to get the jobs in the future we’ve got to have a Budget that ensures that we have growth”.

As announced in the 2009 budget, we see the introduction of the new 50% additional tax rate on income above £150,000, and the tapered removal of free pay for earnings above £100,000. Employers have scrambled to attempt to temporarily forestall the impacts with acceleration of payments to pre 5 April 2010 in terms of salary, bonus and share options. However, these high earners shouldn’t be fooled that their first pay in the new tax year is the end of the high earners hit, many will have substantial residual liabilities calculated in 2012 - with the self assessment filing requirements bringing the truth to light on the overall true liabilities.

So, the press release of Budget 2010 is suitably suffixed “As announced at Budget 2009” in relation to: Income Tax, National Insurance Contributions; Working and Child Tax Credit rates; Child Benefit and Guardian’s Allowance rates; State pension and Pension Credit; Individual Savings accounts.

So what was in the budget for payroll? In reality, very little.

Company Car Tax

Changes were announced to Company Car Tax from April 2012. Five-year measures were introduced from 6 April 2010 on the chargeable benefit of cars and vans in relation to zero emission vehicles and company cars with CO2 emission figures of 75 g/km or less.

Employer-supported childcare – ‘available to all’ rule relaxed

Some employers have expressed difficulty in the past with the HMRC application of the ‘available to all’ rule in the provision of childcare and childcare vouchers, especially with salary sacrifice schemes. Often employers were excluding groups of employees whose earnings were at or near the national minimum wage.

Such schemes faced challenges from the HMRC that this then failed the ‘available to all’ rule contained within the law and therefore, the benefit provision was no longer tax or NICs-free. The ‘available to all’ rule has now been relaxed with 2005-2006 being the effective tax year date and all tax years since.

Anti-avoidance measures

The budget also covered some additional anti-avoidance measures including:

• Company Share Option Plans and Geared Growth Share. This intends to stop companies from using tax-advantaged CSOP, for avoidance prohibiting grants to employees of CSOP options from over share in a company which is under the control of a listed company. This came into effect on 24 March 2010
• Earnings paid through trusts to other entities through the use of Employee Benefit Trusts or other arrangements used to disguise payment of remunerations with effect from 6 April 2011
• Further review and consultation on taxation of geared growth arrangements for employment related securities to ensure that employment income is subject to tax and NICs
• Changes to combat abuse of Corporation Tax deductions provision for Share Incentive Plans where companies pay money to SIP trustees to buy shares from existing shareholder for use in the SIP, but no share of any real value are transferred to employees.

What about the General Election?

So, with very little in the 2010 budget and with the imminent election of a new government and the potential of an Emergency Budget within 50 days, what future changes are being talked about by the major parties?

From April 2010 Labour will further increase personal tax allowances to £145.

The Conservatives do not regard the new additional rate (50%) to have a ‘permanent future’ but equally ‘could not even think about abolishing the 50p rate on the rich while at the same time asking many of our public service workers to accept a pay freeze’.

The Liberal Democrats propose to increase the threshold at which people start paying income tax to £10,000 cutting the average working age income tax bill by £700 and cutting pensioners' income tax bills by £100. The prediction is that four million people on low incomes will completely drop out of paying income tax.