Company cars (Table C)

The new system of emissions-based tax charges on company cars was introduced last year and continues. However, there are two changes:

• the minimum 15% benefit will apply to ratings up to 159 g/km, tightened from 169 g/km in 2002/03
  
• the taxable benefit for free fuel used in a company car is now the same emissions-based percentage multiplied by a set figure of £14,400.

Personal Service Companies

The "IR35" rules apply PAYE and NIC where workers provide their personal services through a company to someone who would otherwise be their employer. Originally, only "business employers" were included, which meant that a personal service company could be a very tax efficient arrangement for employing domestic staff such as nannies and butlers. The Budget has brought domestic staff within the IR35 rules from 10 April 2003, removing this advantage.

Employee Share Schemes

A number of amendments are made to the rules on share-based remuneration and share option schemes. These do not change the basic rules for such schemes:

• approved schemes only lead to CGT on eventual disposal of the shares.
• unapproved schemes lead to income tax, and often NIC, on acquisition of the shares.

However, a number of helpful changes remove unnecessary tax charges, for example where an employee leaves a scheme early as a result of injury, disability, redundancy or retirement. It will also be possible to exercise approved options more frequently than once every three years.

Homeworking

Increasing numbers of employees are working some or all of their time at home. This has led to disputes over deducting household expenses as "incurred in the job" - but the rules are very restrictive and few employees can claim. The Budget will now allow an employer to pay up to £2pw to an employee, with no tax charge arising, to subsidise extra costs incurred in working from home.

Other changes

The Budget introduces changes to a number of existing exemptions:

• increasing the ceiling for annual staff parties from £75 to £150 a head
• increasing the limit on long service awards from £20 to £50 per year of service
• raising the limit on non-cash gifts from third parties from £150 to £250
• removing the limit on the number of "free breakfasts" which can be offered as an incentive for cycling to work (currently 6).