Introduction Background Note
41.At Budget 2014 the Chancellor announced a number of measures aimed at simplifying the administration of employee BiKs and expenses. This followed the Office of Tax Simplification’s (OTS) review of employee BiKs and expenses.
42.The package of four measures consisted of the following:
	Abolishing the threshold for the taxation of BiKs for employees who earn at a rate of less than £8,500 a year (‘lower paid’ employments), with action to mitigate the effects on vulnerable groups disadvantaged by the reforms;
	Introducing a statutory exemption for trivial BiKs;
	Introducing a system of collecting income tax in real time through ‘payrolling’ of BiKs; and
	Replacing the expenses dispensation regime with an exemption for paid and reimbursed expenses.
43.Abolition of the £8,500 threshold is achieved by the removal of Chapter 11 ITEPA 2003. Chapter 11 sets the rules for employees in lower paid employment providing how they are taxed under the benefits code on their BiKs and expenses.
44.The change to abolish the £8,500 threshold has been introduced to simplify administration for employers so they no longer need to monitor if employees are earning at a rate of less than £8,500, or £8,500 or more a year, including their BiKs.
45.All BiKs will be liable to income tax and National Insurance contributions, whatever the level of the employee’s earnings and BiKs. Employers will no longer have two separate reporting requirements on either the P9D, or P11D dependent on the employee’s level of earnings.
46.As a result of the abolition of the £8,500 threshold, new exemptions are introduced for employed carers on board and / or lodging being provided in the home of the person that they are caring for. This exemption is covered in a separate section.
47.Another exemption will protect ministers of religion in a lower paid employment from the effects of the changes where the minister is earning at a rate of less than £8,500 a year. This exemption will mean that ministers of religion will see no change in the treatment of their benefits in kind for tax and NICs purposes, following the abolition of the £8,500 threshold.
48.These changes will be introduced for the 2016-17 and subsequent tax years.