Rishi Sunak backtracks on income tax plans – HMRC remove new ‘benefit in kind’ rule

Rishi Sunak was recently written to by Mel Stride, an MP and Chair of the Treasury Committee, who was concerned about guidance published by HMRC on July 6. This guidance detailed that coronavirus testing kits, or tests carried out by a third party, would be viewed as a taxable benefit and therefore would have income tax levied.

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Mr Stride provided the following comments as he wrote to the Chancellor of the Exchequer: “Many employees, especially healthcare and hospitality workers, are required to undergo regular coronavirus testing.

“This new guidance is unclear and will worry a large number of workers.

“If these tests are to be treated as a taxable benefit in kind, the tax bill for workers could soon mount up.

“Many of our key workers could be faced with the perverse incentive of avoiding employer-sponsored tests in order to reduce their tax bill.

“This cannot be right. I’ve asked the Chancellor to look into this as soon as possible.”

Yesterday in the House of Commons, Mr Stride implored Rishi Sunak to look into the issue and the Chancellor acknowledged this: “I’m delighted with him for raising this with me and of course we will look into it very quickly.”

Following this, exemption for the tests was granted late Tuesday evening.

HMRC have now removed this information on coronavirus testing kits from their guidance page.

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Mr Stride expressed gratitude in his response: “It would not have been right to increase the tax bill for workers every time that they had a coronavirus test.

“’I’m glad that common sense has prevailed.

“And I’m grateful that the Chancellor has listened to the Treasury Committee and reversed this decision so swiftly.”

The initial plan was to list coronavirus testing kits as “benefits in kind”.

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Benefits in kind are benefits which employees or directors receive from their employers which are not included in their salary or wages.

They can also be referred to as perks or fringe benefits and include things such as company cars or medical insurance.

Many of these kinds of benefits will not be taxed at all.

However, where benefits in kind are taxable, the tax is paid on the taxable value of the benefit.

HMRC defines this as the cash equivalent value.

To see exactly how much tax an employee needs to pay, they can head to the government’s website where a free-to-use tool can be used to evaluate income tax bills.

This tool can be used to:

  • Check on a tax code and personal allowance
  • See if a person’s tax code has changed
  • Tell HMRC about any changes that will affect a tax code
  • Update employer or pension provider details
  • Get an estimate of how much tax a person will pay over the whole tax year
  • Check and change the estimates of how much income a person will get from their jobs, pensions or back savings interest

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