Budget 2021 - Employment Taxes
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The Chancellor maintained his support for jobs and employment by extending the furlough scheme until the end of September 2021. However, he has introduced some contributions from employers from August onwards. The Chancellor also announced increases to support through the Kickstart and Apprentice scheme grants.
As expected, the Chancellor did not further postpone off-payroll labour rules for the private sector.
Stephanie Wilson - Partner and Head of Employment Taxes
Steph helps employers achieve cost savings by implementing more effective pay and benefits as well as effectively managing their employment tax and compliance risks. Steph enjoys providing real commercial insights into the everyday issues, stresses and synergies between finance, tax and HR professionals.
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Off-payroll working rules from 6 April 2021 – going ahead as planned
As widely anticipated, no further delay was announced in the introduction of the changes to the off-payroll working rules, commonly referred to as “IR35”, and they will take effect in 35 days-time. Medium and large businesses in all sectors, and Charities, will potentially be impacted and need to demonstrate ‘reasonable care’. Our employment team has developed technology-based solutions to help with the task.
Coronavirus Job Retention Scheme extended to September 2021
CJRS, also known as the furlough scheme, will continue to operate in its current form until June 2021 which means:
- Employees will continue to receive 80% of pay for hours not worked (subject to the cap)
- Employers will pay national insurance and pension contributions.
Between July and September 2021 the employer will still be responsible for paying national insurance and pension contributions, but in addition will also start to contribute to the 80% of employer pay on a tapered basis.
||To June 21
|Government contribution to pay
|Employer contribution to pay
Employees who started after 30 October 2020, were employed on 2 March 2021 and have had earnings reported to HMRC under RTI between 20 March 2020 and 2 March 2021 are now able to be furloughed and claimed for with effect from May 2021 onwards.
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Supporting Trainees, Apprentices and job seekers
The Government’s desire to support high quality traineeships for young people and apprentices was backed by additional employer funding. This comprises £1,000 per English work placement for 16-24 year olds during 2021/22 and £3,000 per new apprentice hired between 1 April 2021 and 30 September 2021. It represents an increase of £1,500 compared to the previous scheme (or £2,000 for those aged 24 and under) and is in addition to the existing £1,000 payment for employers engaging new 16-18 year old apprentices (or those with an Education, Health and Care Plan aged under 25).
From July 2021 funds will be available for English employers to set-up and expand portable apprenticeships which straddle multiple employers/projects. This will open up apprenticeships to more employers, including those in the creative sector.
Both of these provisions will deliver savings and so we would encourage employers to take advantage of this funding where possible. In addition, the Government stated its intention to invest in and pilot new technologies during 2021/22-2022/23 to support jobseekers to find work best suited to their skills and experience.
Note that education is a devolved matter so Scotland and Wales will introduce their own rules.
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COVID-19 related employment tax breaks and Statutory Sick Pay reclaims
Importantly as we approach P11D/PSA season, the Chancellor reminded us of certain employment tax breaks and introduced extensions for others. Critically the 2020/21 income tax exemption and NIC disregards for Coronavirus antigen tests provided and reimbursed by the employer, have been extended to 2021/22. This extension also applies to employer reimbursed expenses linked to the cost of home office equipment. In addition, there has been a relaxation in the requirement that employer provided bikes and cycle safety equipment under the Cycle to Work scheme must be predominantly used for qualifying journeys. This is good news for many employers as the Government’s 4 step policy remains consistent that employees should continue to work from home where possible during the pandemic.
Also, the temporary COVID-19 measures permitting small and medium sized employers to reclaim up to two week eligible Statutory Sick Pay (SSP) costs per employee will continue. As with other business support schemes, the Government will set out steps for closing this scheme in due course but for now this remains valuable to many employers during periods of high sickness absences.
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Call for evidence: how can the Enterprise Management Incentive be improved?
Enterprise Management Incentive (“EMI”) share option scheme is a HMRC tax advantaged share option plan designed to help recruit, motivate and retain employees of small and medium entrepreneurial companies via equity ownership. The EMI scheme is particularly popular amongst tech start ups but has faced criticism in recent years over being too restrictive and inaccessible for scale ups and larger innovative companies as well as those backed by private equity.
BDO is pleased to hear that the government opened a call for evidence to hear industry views on how the EMI scheme can be extended/improved to better incentivise the employees of UK businesses. The call for evidence is open until 26 May 2021.
BDO will respond to the call for evidence and we will submit our views to the government on how the EMI scheme can work better for the economy. We are keen to hear from you your thoughts on how the EMI scheme helps the recruitment or retention of staff and whether it should be extended to larger enterprises. Your views will help shape the content of our response to the government.
Please get in touch with your usual BDO Share Plans & Incentives contact if you would like to share your views with us on EMI.
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Enterprise Management Investment options not lost for furloughed employees
Legislation will be introduced to ensure that employees who hold EMI share options and who have been put on furlough or who saw a reduction in their working hours below the EMI statutory requirement of 25 hours a week and 75% of their total working time will not lose the tax benefits of the EMI scheme. This will formalise the treatment that was announced by HMRC in the summer of 2020.
It has also been confirmed that new EMI options can be granted to employees working reduced hours as a result of COVID.
BDO applauds the relaxation of EMI working time requirements for those affected by COVID-19. If the reduced working hours continue past 5 April 2022, the EMI tax advantages for the employees will be lost.
Employers should consider including furloughed employees in their annual EMI option grants.
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