The UK Government revealed its plans for the British economy in the Autumn Statement on 25 November 2015, which included some key tax announcements that will impact HR practitioners and companies with employees in the UK.
In this article we highlight some of the key announcements from an HR perspective.
Employment and benefits
Employee share schemes
The Government announced that there will be certain technical changes affecting tax-advantaged and non-tax-advantaged employee share schemes, to be introduced in the Finance Bill 2016. Although no further details were published, they are likely to address some of the issues that have arisen from the legislative changes made over the last two years, particularly the new self-certification regime for tax-advantaged share schemes. The self-certification regime will require companies with a tax-advantaged plan to register the plan with the HM Revenue & Customs (HMRC) and certify that it is compliant with the relevant legislation (instead of the previous HMRC approval regime).
These changes will also include a clarification of the tax regime applicable to internationally mobile employees (IMEs) with share options and employment-related securities. Following changes in the Finance Act 2014, there has remained some uncertainty about how certain types of employment-related securities held by IMEs should be taxed, particularly Restricted Stock Units. HMRC has been carrying out an informal consultation over the last few months through meetings with key stakeholders, and if the changes are as proposed in those meetings, they are likely to be broadly welcomed.
The Government accepted the majority of recommendations from the Office of Tax Simplifications’ review of employment status. These recommendations were mainly intended to address the current lack of certainty in determining certain individuals’ status as employed or self-employed, and included a possible statutory employment test. Details on which recommendations will be taken forward have yet to be published, but they are likely to have significant implications for employers, particularly those with a large number of contractors in their workforce.
An apprenticeship levy will be introduced in April 2017, set at a rate of 0.5% of an employer’s pay bill, to be collected through the Pay As You Earn system (via payroll). This will include an allowance of £15,000 for employers to offset against the levy which will mean that the levy will only be paid on employers’ total salary bills over £3 million. Draft legislation will be included in the Finance Bill 2016.
The levy will be used to fund more apprenticeships and the Government will also provide financial incentives to companies that pay the levy to commit to more apprenticeship training.
Digitalisation of tax
In the Summer Budget the Government committed to transforming the current tax system by introducing simple, secure and personalised digital tax accounts and removing the need for annual tax returns for individuals within self-assessment. From 2020, most businesses, self-employed individuals and landlords, will be required to keep their records digitally and update them at least quarterly. This will not apply to employed individuals unless they have secondary income of more than £10,000 per year.
Employment intermediaries, travel and subsistence expenses
As announced in the Summer Budget, from 6 April 2016 there will be restrictions on tax relief for travel and subsistence expenses of workers engaged through employment intermediaries, such as an umbrella company or personal service company.
Salary sacrifice arrangements
The Government will be conducting further research, including consultation with employers, on the use of salary sacrifice schemes. HM Treasury commented that “The Government remains concerned about the growth of salary sacrifice arrangements and is considering what action, if any, is necessary.”
A salary sacrifice scheme is an arrangement by which the employee agrees to forgo part of their salary in return for some form of non-cash benefit, such as increased pension contributions or childcare vouchers.
It remains advisable that companies operating salary sacrifice schemes should ensure that their documentation and procedures are fully compliant – should you require a review of your current documentation, please contact us.
Taxation and allowances
The Government has delayed the next two increase phases of automatic enrolment minimum contributions by 6 months to coincide with the start of the tax year. The increases will now take effect in April 2018 and April 2019. The intention is that this will simplify the administration of auto-enrolment, especially for small businesses.
Whilst this is good news for employers wishing to pay the minimum statutory contributions, it is a setback for employees who will receive reduced pension contributions into the designated pension plan and will ultimately result in a reduced pension pot.
Other workplace pension changes were expected to be proposed, however many matters have been earmarked for future consultation.
From September 2017 the free childcare entitlement will be doubled from 15 to 30 hours for working families with 3 and 4 year old children, and the Government will introduce Tax-Free Childcare from early 2017 (to replace the existing childcare vouchers scheme). Both the enhanced free childcare entitlement and Tax-Free Childcare will only be available to families with an income of less than £100,000 per parent (previously £150,000) and where each parent’s weekly income is equivalent to at least 16 hours (previously 8 hours) at the national living wage.
We can expect to see more detail on these proposals over the next few weeks and months. The Finance Bill 2016, which will contain the draft legislation required to implement any changes, is due to be published on 9 December 2016. We will be publishing further updates on these proposals as and when they emerge.
Read our outline of key HR considerations raised in the Summer Budget 2015, here
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