TaxApr 25 2018

HMRC to probe employee benefits and tax reliefs

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HMRC to probe employee benefits and tax reliefs

HM Revenue & Customs is gathering views on employee benefits, national insurance relief and venture capital investments.

The tax office will send out letters to employers of young people - staff aged less than 21 and apprentices aged less than 25 - to garner their views and experiences of applying National Insurance (NI) contribution relief.

The work will be carried out during April and May in conjunction with independent research agency Kantar Public. 

The work comes as HM Treasury appears increasingly keen to support younger savers.

For instance it is believed to be mulling plans to increase the pension tax relief offered to young savers but it is currently unclear how this will be funded.

The tax office will also carry out a survey among employees to find out about the types of benefits-in-kind they may be getting through their employment.

This will be carried out in May with independent research agency IFF Research, which will send out a joint letter to a sample of customers inviting them to take part.

Benefits in kind are perks which employees receive from their employment but which are not included in their salary.

In October 2016, the Department for Work & Pensions and Department of Health issued a paper highlighting the cost of ill-health to the economy, estimated at around £100bn per year.

The paper posed a number of questions regarding the role that smaller employers could play in supporting the health of their workforce.

It went on to state the government wanted to see employers doing more to invest in their employees’ health and wellbeing, stressing the benefits that such investment brings. 

Meanwhile, tax efficient venture capital investments are also on the taxman’s radar. 

HMRC is in the process of researching people’s experiences and attitudes to the products.

Research partner Kantar Public is contacting individuals and businesses between March and June to invite them to take part in the survey.

HMRC is encouraging participation in this study to aid the government’s understanding of venture capital schemes.

The Office of Tax Simplification recently called for an urgent review of how the tax system affects businesses.

It said the complex patchwork of tax charges and reliefs, which apply at the various points in the business life cycle, would benefit from an overhaul to reduce complexity, make reliefs more accessible and allow businesses to fulfill their potential.

But VTCs are increasingly becoming a staple in people's investment portfolios, even among the young.

Alistair Cunningham, financial planning director at Wingate Financial Planning, said: "On venture capital trusts we have a problem that the risk metrics are often too great even taking into account the tax breaks. 

“HMRC walk a fine line here,  trying to provide an incentive to invest in higher risk businesses and start-ups, but without them being abused."

carmen.reichman@ft.com