30 October 2018

Detailed changes to employment taxes

The Budget included a number of other tweaks and reforms to the employment tax landscape

Alongside the headline-grabbing change – the extension of the off-payroll workers rules to the private sector (see below) – the Budget included a number of other tweaks and reforms to the employment tax landscape.

Employment Allowance:

From April 2020, the £3,000 allowance against employer NIC costs will be restricted to those employers with an annual employer NIC charge of less than £100,000 in their previous tax year.

NIC on termination payments:

The alignment of the NIC rules with the current tax rules on termination payments has been postponed until April 2020.

Work-related training:

Following consultation responses, rather than amend the current scope of tax relief on such costs, the Government has instead concentrated on extending the wider availability of skills training.

Share schemes:

The change to the Entrepreneurs’ Relief qualifying period (increased to 24 months from April 2019) will impact Enterprise Management Incentive (EMI) share options as well as direct share ownership. The Budget also included some housekeeping of stamp duty rules for Share Incentive Plans (SIPs) to reflect current HMRC policy following the move to self-registration.

Short Term Business Visitors (STBVs):

There will a widening of eligibility as well as some administrative easements in the reporting and payment of tax under the STBV special arrangements from April 2020.

Company vehicles:

From April 2019, the multiplier for the car fuel benefit charge will increase to £24,100, the flat-rate van benefit charge to £3,430 and the flat-rate van fuel benefit charge to £655.

Off-payroll working in the private sector

As seemed almost inevitable following the wording of HMRC’s prior consultation document, the off-payroll worker rules currently in place for the public sector are to be extended to the private sector.

There is some good news. First, the changes will not apply until April 2020. Secondly, the new rules will only apply to large and medium-sized employers, thus saving smaller employers from having to grapple with the implications.

The effect of the new rules will be to change both who determines whether the engagement of an individual’s services constitutes disguised employment and who accounts for PAYE and NIC where the ‘IR35’ rules apply. The client receiving the individual’s services will take on responsibility for determining whether IR35 applies and will also be responsible for deducting and paying over any PAYE tax and NIC, unless another intermediary is in the chain.

Because these new rules will apply to payments made on or after 6 April 2020, they could apply to payments made under existing contracts.

HMRC has indicated that it will continue to work with stakeholders to improve the online employment status tool  and will not undertake targeted campaigns in respect of past periods where a worker’s tax status changes as a result of this new legislation. The delay in implementation will also allow for greater feedback following the public sector’s adoption of these rules, which took place in April 2017.

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