Do you drive a company car or have employees who do? If so then you need to be aware of some signifi cant changes to the benefi t in kind rules.

Background

Where a director, or an employee, is taxable on a company car, then if fuel is provided as well as the car, there is an additional benefit.
The car fuel benefi t is linked to the level of the car's CO2 emissions. The CO2 emission percentages that apply in determining the company car benefit are used in the car fuel calculation but, instead of applying the percentage to the list price of the car, the percentage is applied to a fi gure known as the multiplier.
Since 2003/04, the multiplier has been set at £14,400. However, in the Pre-Budget Report it was announced that this multiplier will increase to £16,900 from 6 April 2008, a 17% increase!

Example

John is provided with a company car and fuel for 2007/08. The car has CO2 emissions of 209g/km and a petrol engine.
For this car the appropriate percentage is 28%. The cash equivalent of the fuel benefi t is £4,032 (£14,400 x 28%).
Under the new rules for 2008/09, the CO2 emissions percentage rises to 29%, an increase announced some time ago. When this higher percentage is applied to the new figure of £16,900, the car fuel benefi t increases to £4,901 (£16,900 x 29%), an overall rise of 21.6% for the employee! And the employer's Class 1A National Insurance, based on the taxable benefi t, will also increase.
In order to make a car fuel benefi t fi nancially worthwhile, private mileage will need to be substantial. Whilst each computation will vary, due to differing levels of the benefit, fuel costs and fuel consumption of the car in question, as a rule of thumb an employee would need to be travelling at least 10,000 - 12,000 private miles per year to make the benefit cost efficient.

An alternative?

With such large increases, thought needs to be given by employers and employees as to whether the employee would be better off if they provided their own fuel and claimed a mileage allowance from their employer for business travel.
HMRC publish rates which can be used to reimburse employees tax free for business miles in a company car. These rates increased for journeys undertaken from 1 January 2008.
Engine 1400cc or less 1401cc - 2000cc Over 2000cc
Petrol 11p 13p 19p
Diesel 11p 11p 14p
LPG 7p 8p 11p

With such large increases in the car fuel benefi t on the way, employers and employees should consider their positions and alternatives before April 2008. Please contact us if you would like to discuss this issue further.

Employees who are out of work on sick leave can build up holiday entitlements, according to an Advocate General of the European Court of Justice. If they are then laid off, they must be paid in lieu of untaken holiday, she said.
The Advocate General's opinion is not binding, but is mostly followed by the European Court of Justice (ECJ), which will later rule on the case involving employees and the UK HM Revenue & Customs (HMRC).
Employees who were on sick leave took employment tribunal claims against HMRC to assert their rights to take leave or, in the case of those who had since been dismissed, be paid in lieu of leave. Their claims were made under the Working Time Regulations.
Though the claims were upheld by the original tribunal, the Court of Appeal rejected them. When the case reached the House of Lords, they asked the ECJ to interpret the Working Time Directive, from which the Regulations came.
Advocate General Verica Trstenjak has said that workers should be allowed both the holiday entitlement for the period during which they were sick and payment in lieu of it if they had been fired. Trstenjak said that there must be no confusion between sick leave and holiday, and that the two must never run concurrently. "Sick leave and annual leave serve different purposes and therefore must not, for legal purposes, be regarded as interchangeable," she wrote.

The ruling will not be welcomed by employers, said Catherine Barker, an employment law specialist at Pinsent Masons.
"This is disappointing for employers because it will potentially increase the cost to employers of keeping the long-term sick on their books," she said. "But it could also be bad news for employees because it could lead to employers looking to limit their liability in sickness cases by terminating employment more quickly than they otherwise would, even if absent for genuine incapacity reasons."

The opinion says that there is a basic right to paid leave, and that it cannot be taken away by illness. "The existence of the right to paid annual leave cannot be made subject to a worker's capacity for work and therefore in principle a worker rendered incapable of work through illness has a corresponding right to annual leave," wrote Trstenjak. "However, he may not take this leave during a period in which he is otherwise on sick leave."

In a second case ruled on by the Advocate General from the German courts, Trstenjak said that any leave built up cannot be cancelled just because the end of an administrative year passes.

"Employees will be able to take holiday leave even if it means taking it in a subsequent leave year," said Barker, explaining the opinion. "In addition, if an employee's contract is subsequently terminated he will be entitled to be paid in lieu of leave which has accrued but not been taken during sick leave. It is not entirely clear whether that extends to any untaken holiday carried over from a previous leave year - although this would seem to be the suggestion from the opinion."

"The Advocate General's view is that it will be equally important for an employee to have a paid period of rest period between jobs if he or she has been unable to take advantage of this whilst still employed, due to illness or injury," said Barker.

Another unclear point is how far the opinion can go, said Barker. "It is not clear from the Advocate General's opinion whether there is any limit on the right to take holiday once the worker is fit to return to work or to be paid in lieu if the employment has terminated," she said. "For example, can a worker who has been on long term sick leave for two years take two years' worth of statutory annual leave when they return to work from sick leave? Are they entitled to pay in lieu of that holiday if the employment is terminated?"

"If the full European Court does follow this opinion I think that employers will need to become more proactive in managing long-term sickness absence rather than letting employees, who may never even return, fester on the payroll indefinitely," said Barker. "If there is no limit on the number of years' annual leave entitlement that can be carried over or be paid in lieu of, employers may have to consider whether they can limit their liability by terminating employment sooner rather than later - although in doing so they will need to take care not to fall foul of disability discrimination and unfair dismissal laws."

The government had previously announced their intention to extend Statutory Maternity Pay (SMP), Maternity Allowance and Statutory Adoption Pay from the current 39 weeks entitlement to 52 weeks.

They had also announced that to coincide with the increases mentioned above they would introduce Additional Paternity Leave and Pay (APL and APP). They had stated their intention to make all of these changes by the end of this Parliament.

The government has announced that it is still their intention to introduce these changes by the end of this Parliament. However the proposed implementation date of April 2009 has been deferred until at least April 2010. This means that the rules may be implemented at the earliest for babies due from April 2010.

What is the current entitlement?

The current entitlement to SMP generally gives mothers the right to 90% of their average weekly pay for the first six weeks reducing to £112.75 for the remaining 33 weeks. There is no intention to increase the amount of weeks paid at the earnings related rate.

What would be the entitlement to APL and APP?

The introduction of APL and APP would give employed fathers a right to take up to an additional 26 weeks off work with pay to care for their child in its first year. The 26 week period would in effect be transferred from the mother's entitlement to SMP so would be conditional on her returning to work.

"Sun Pillar" at Sunset

arbor
(noun) A shady resting place in a garden or park, often made of rustic work or latticework on which plants, such as climbing shrubs or vines, are grown.
Synonyms: bower, pergola
Usage: I never saw such a garden-large and shady, full of box-bordered paths, and lined with long grape-covered arbors with seats under them.

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Disclaimer - for information of users: This newsletter is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this newsletter can be accepted by the authors or the fi rm.