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Employment Tax

Company Car and Fuel Benefit Tax

Company Car and Fuel Benefits both increase from 6 April 2008. There will be a 1% increase in the CO2 percentage for company cars and fuel, although cars capable of being run on E85 (BioEthanol) fuel will see a 2% discount.

In addition to this, the amount to which the CO2 percentage is applied to calculate the Fuel Benefit is increased from £14,400 to £16,900 from 6 April 2008. This figure will further increase at least in line with the Retail Price Index from 6 April 2009.

Company Car benefit will see a further increase from 6 April 2010, with a 1% increase in the CO2 percentage.

Enterprise Management Incentives (EMI)

The maximum value of shares over which EMI options can be granted is to be increased from £100,000 to £120,000 per employee with effect from 6 April 2008.

EMIs are tax and National Insurance advantaged share options available to small companies with gross assets not exceeding £30 million, to help them recruit and retain employees.

To ensure compliance with EU State aid guidelines, legislation will be introduced in the Finance Bill 2008 to make two changes:

1. EMIs will be limited to qualifying companies with fewer than 250 employees; and

2. Companies involved in shipbuilding, coal and steel production will no longer qualify for EMI.

Clarification of corporation tax deduction available in respect of employment related shares and securities

The legislation relating to the corporation tax relief available in respect of employment related securities is to be clarified to make it clear that that corporation tax relief is generally only available on employment related shares and securities on which income tax is charged. 

This does not affect the corporation tax relief available in respect of Enterprise Management Incentive options which continues to be available despite there being no income tax charge.

Return to Work Credits

Legislation is introduced from 6 April 2008 to exempt from income tax and National Insurance, payments made under the following schemes:

- Return to Work Credit

- In-work Credit

- In-work Emergency Discretion Fund

- In-work Emergency Fund

Previous legislation restricted exemption from income tax and National Insurance from “pilot schemes” run by the Department of Work and Pensions in Great Britain, and the Department of Employment and Learning in Northern Ireland.

Payments made under all national schemes paid on or after 6 April 2008 will be exempt from income tax and National Insurance.