Click on the headlines below to navigate our employment tax analysis from the Autumn Budget:
Off-payroll rules extended to the private sector
Employer’s NIC charge on termination payments is delayed until 6 April 2020
Apprenticeship levy reform
Short-Term Business Visitors - administrative burden on employers to be reduced
To help taxpayers comply with the existing rules and bring private-sector organisations in line with public sector bodies and agencies, the Government will reform the off-payroll working rules (known as IR35) in the private sector.
In April 2017, the Government changed the rules for public sector bodies engaging workers through Personal Service Companies (PSCs). This shifted the responsibility for establishing whether IR35 applied to the engagement from the worker and their PSC to their engager. Consequently, if the engager thinks IR35 applies, it is required to deduct PAYE from the payment it makes to the PSC and pay employer’s NIC on that payment.
Following a consultation, the Government has announced its intention to extend the rules that currently apply in the public sector to the private sector. The change will be introduced from April 2020. Small organisations will be exempt, but no details of which organisations will qualify for this exemption have yet been released. The Government expects to raise £1.1bn from this measure in 2020-2021 and a further £1.9bn by the end of 2023-2024, suggesting it perceives significant non-compliance in this area.
Any private sector organisation that engages workers through PSCs, or any other off-payroll labour, should take the opportunity to review their position and examine their potential exposure. The rules for IR35 are complex and do not apply in every scenario; it is important to establish how this change may apply to your organisation, and factor in the potential impact for your workforce.
The BDO employment tax team has significant experience in IR35 and can help map the impact of the changes and develop a bespoke solution to meet your needs.
The Government has announced further delays to the proposed employer’s NIC charge on termination payments over £30,000. It is now intended that the proposed reform will take effect from 6 April 2020. These rules were expected to take effect from 6 April 2019, following the Government’s previous deferral on 2 November 2017.
The delay will be a welcome surprise for those employers who were looking to implement any larger redundancy packages before 6 April 2019 and will give them further time to plan and implement accordingly.
However, it is still important for employers to consider the other employment tax termination rule changes that took effect on 6 April 2018 – read more.
The Government remains committed to its original ambition of creating three million new apprenticeships by 2020 and has introduced a number of reforms to strengthen the role of employers.
Since April 2018, levy-paying employers have been able to share up to 10% of their funds with employers in their supply chain. This limit will be lifted to 25% although we do not yet have detail of when this will come into effect. As this sharing will trigger the ‘State Aid’ rules, it is also important to continue to monitor the total ‘State Aid’ received during any three-year period to ensure it remains below the €200,000 limit.
The co-investment rate for apprenticeship training will be halved from 10% to 5%.
The Government will invest further in the Institute for Apprenticeships and National Apprenticeship Service in 2019/20, to identify gaps in the training provider market and increase the number of employer-designed apprenticeship standards available to employers. We expect further consultation in due course.
The Government recognises that while the value of Employment Allowance (EA) to larger businesses is marginal it is still meaningful for smaller businesses, providing them with up to £3,000 off their employer’s NIC bill. Therefore, from April 2020, the Government plans to make EA available only to employers with an employer’s NIC bill below £100,000 in their previous tax year. This measure is expected to ensure that over 99% of micro-businesses and 93% of small businesses continue to benefit from EA.
In May 2018, HMRC issued a formal consultation to review the Short Term Business Visitor (STBV) tax rules, aiming to “simplify the tax treatment of STBVs from the foreign branch of a UK company, to ensure the UK is an attractive location to headquarter a business.” BDO submitted a written response to HMRC expressing its view that changes should be made to create a more level playing field for all UK companies. Currently, UK companies with overseas branches are disadvantaged when either:
- They second individuals overseas who continue to make business trips back to the UK
- They have local employees working for the overseas branch who make business visits to the UK.
The Government has announced that from April 2020 it will widen eligibility for the STBV’s Pay As You Earn special arrangements and extend its deadlines for reporting and paying tax. Further details of these new rules are awaited and it will be interesting to see whether the new rules will make it easier for companies to comply with their existing obligations or whether they will also provide potential relief from the UK tax that would otherwise be due. The latter approach would be more aligned with HMRC’s aim to boost inward investment.
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