NEW ADVISORY FUEL RATES FROM 1 JULY 2009

Date Added: 05 June 2009

HMRC has published revised Advisory Fuel Rates which are effective from 1 July 2009, although the new rates can be implemented immediately if employers wish to do so (see http://www.hmrc.gov.uk/cars/advisory_fuel_current.htm). As a reminder, these rates only apply where employers:

• reimburse employees for business travel in their company cars, or

• require employees to repay the cost of fuel used for private travel.

Where the rate paid per mile of business travel is no higher than the advisory rate for the particular engine size and fuel type of the car, HMRC will accept that there is no taxable profit and no Class 1 NICs liability.

The next rate change is likely to be announced in December 2009 and will be effective from 1 January 2010. However, HMRC will also consider changing the rates if fuel prices fluctuate by 5 per cent from the published rates when each review is made and they consider the price change will be sustained.

HMRC SETS A BENCHMARK FOR SUBSISTENCE

Date Added: 18 May 2009

From April 2009 HMRC has agreed to allow a new system of benchmark "round sum" allowances to be paid to employees who buy meals when travelling, provided they are within these rates and the employee incurs the cost.

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ANOTHER NAIL IN THE PENSIONS COFFIN?

Date Added: 01 May 2009

Buried within the details of proposed changes to employers' pension contributions was news that high earners will surely see as yet another nail in their pension's coffin.

Not only will those earning over £150,000 be subject to reduced pension relief from 2011, but they will also have to pay tax on their employer's contribution to their pension. The proposal and could add thousands to people's annual tax bills, if they choose to continue with their pension arrangements.

It is not yet clear exactly how the scheme will work, but if for example an employer is paying 15% of their staff's salaries into their pension scheme, then an employee earning £180,000 a year would benefit from employer's contributions of £27,000. A potential 30% tax charge on that contribution, being the difference between their marginal income tax rate of 50% and the 20% ceiling on relief for contributions, would equate to an extra £8,100 tax a year.

The government is consulting on these proposals, but if they are brought in it would be surprising if many earners over £150,000 wished to continue with pension contributions.

Those taxpayers with control over how they extract their income from their various vehicles will have a number of options to mitigate their liabilities but high paid employees with no such control will have limited options. They could find themselves forced to either suffer increased liability or seek to channel their retirement savings into vehicles such as Venture Capital Trusts or Enterprise Investment Schemes, which offer tax savings, but only if one is prepared to accept a far higher level of commercial risk to capital.

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For further insight into the Spring Budget, please visit our dedicated Budget 2009 news section

BUDGET 2009 ANALYSIS

Date Added: 24 April 2009

To see our in depth analysis of the Budget please check out our dedicated area here.