HMRC has launched a consultation on proposals that, in the government’s view, aim to simplify the tax and NIC treatment of termination payments. The main proposal, on which HMRC is seeking views, is to remove the distinction between contractual and non-contractual termination payments, so that the majority of such payments is taxed in the same way.
The government has introduced a tax exemption of up to £500 (per tax year, per employee) on medical treatments recommended to help employees return to work. This will be applicable to treatments recommended by health professionals at Fit for Work and health professionals within employer-arranged occupational health services.
On 16 October 2014, the Tax-Free Childcare draft guidance was published. The Tax-Free Childcare scheme, introduced by the Childcare Payments Bill 2014-15, is designed to replace current employer supported childcare schemes. In March’s budget, it was confirmed that the New Scheme will be launched in autumn 2015. Responses to the consultation must be sent to HMRC by 15 December 2014.
In a recent case, the First-Tier Tribunal has held that a supplier who accepted a reduced payment under a settlement agreement, was entitled to recover the overpaid VAT.
From 1 January 2015, the VAT rate payable on business to consumer supplies of digital services will be determined by the location of the consumer, rather than of the supplier. This means that the VAT will be charged in the country of the consumer as well as at the relevant rate for the country of the consumer.
There are a number of payments that an employee may receive on termination of their employment, some of which will be liable to income tax and some of which will not. HMRC’s Employment Income Manual contains detailed guidance about the categorisation of the many different types of employment payments and their treatment for income tax purposes.