Employment Taxes update

Brian Rudkin

Brian Rudkin

Director and Head of Employer Services

29 October 2018

    Once again, employment matters were prevalent in the Autumn Budget which comes as no surprise.

    Off-payroll worker rules

    The big announcement, which was widely predicted, was the extension of the off-payroll worker rules (or “IR35” to use the common term) to the private sector for those workers providing services via Personal Service Companies.

    The Chancellor has confirmed this will be delayed until April 2020 which will be welcomed by all businesses affected. It has also been confirmed that the new rules will not apply to 1.5m smaller businesses although it is not yet clear what the definition of “small” is for these purposes.

    A further consultation will be issued over the coming months, presumably to cover some of the practical measures which are currently causing issues in the public sector, and to clarify which businesses can stay with the existing IR35 rules, with draft legislation expected to be ready by summer 2019.

    Other employment announcements

    There was a mixed bag of other employment changes announced which will affect many employers and employees.

    On a positive note, hidden in the depths of the detail was a statement that employer NIC on termination packages over £30,000 will be further delayed until April 2020 (this is the second year it has been delayed) and another positive measure is the reduction to the co-investment rate for apprentices in smaller businesses from 10% to 5% effective from April 2019.

    Other measures of note include:

    • The removal of the £3,000 employment allowance from April 2020 for businesses with an employer NIC bill of more than £100,000 per annum.
    • Changes to the reporting and withholding rules for Short Term Business Visitors (when an overseas employee is coming to the UK for work purposes) including widening the eligibility and extending reporting deadlines.
    • Confirmation that the exemptions under Optional Remuneration Rules (covering salary sacrifice) will not be extended to include work related training costs other than retraining
    • RPI increases to the company car fuel multiplier and van and van fuel scale charges from April 2019. The increased charges being £24,100, £3,430 and £655 respectively.
    • Increases to National Living Wage and National Minimum Wage rates from April 2019, subject to Parliamentary approval, in line with recommendations from the Low Pay Commission. The headline rate for National Living Wage will be £8.21 per hour for workers aged 25 and over.

    In summary, this Budget could have been worse for employers – a lot worse. There is pain to come from the off-payroll worker rules in the private sector for many businesses but at least we have some time to properly prepare for this, and time for HMRC to ensure legislation is fit for purpose before it becomes mandatory.