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Employment tax changes announced in Autumn Statement 2016
27 November 16 | By: Jas Jhooty
In the 2016 Autumn Statement the Government have announced far-reaching employment tax measures that will affect all employers over the coming years. Recently HMRC have issued a series of ill thought out consultations on proposed changes to employment tax legislation (e.g. on salary sacrifice) and despite facing widespread opposition have decided to plough on ahead with the proposed changes regardless.
Following consultation, the tax and employer National Insurance advantages of salary sacrifice schemes will be removed from April 2017, except for arrangements relating to pensions (including advice), childcare, Cycle to Work and ultra-low emission cars. This will mean that employees swapping salary for benefits will pay the same tax as the vast majority of individuals who buy them out of their post-tax income. Arrangements in place before April 2017 will be protected until April 2018, and arrangements for cars, accommodation and school fees will be protected until April 2021.
Off-payroll working rules
Following consultation, the government will reform the off-payroll working rules in the public sector from April 2017 by moving responsibility for operating them, and paying the correct tax, to the body paying the worker’s company. The government believes public sector bodies have a duty to ensure that those who work for them pay the right amount of tax. This reform will help to tackle the high levels of non-compliance with the current rules and means that those working in a similar way to employees in the public sector will pay the same taxes as employees. In response to feedback during the consultation, the 5% tax-free allowance will be removed for those working in the public sector, reflecting the fact that workers no longer bear the administrative burden of deciding whether the rules apply.
There is a very strong possibility of these rules being extended into the private sector twelve months later, thus finally putting the nail in the coffin into the Government’s perceived IR35 quandary.
As announced at Budget 2016, from April 2018 termination payments over £30,000, which are subject to income tax, will also be subject to employer NICs. Following a technical consultation, tax will only be applied to the equivalent of an employee’s basic pay if their notice is not worked, making it simpler to apply the new rules. The government will monitor this change and address any further manipulation. The first £30,000 of a termination payment will remain exempt from income tax and National Insurance.
Valuation of benefits in kind
The government will consider how benefits in kind are valued for tax purposes, publishing a consultation on employer-provided living accommodation and a call for evidence on the valuation of all other benefits in kind at Budget 2017
Employee business expenses
The government will (again) publish a call for evidence at Budget 2017 on the use of the income tax relief for employees’ business expenses, including those that are not reimbursed by their employer.
How emTax can help
We are awaiting publication of the technical details of how these proposed changes will be effected These are expected next week, and we will of course keep you informed of what these changes will mean to your business.