Autumn Budget 2017: Employment Tax
As with the last Budget, this one was light on changes affecting employers and the majority of those that were announced were relaxations or consultations that may actually reduce the administrative burden for employers. However, we can expect more changes – perhaps in 2019 – with the publication of consultations on off-payroll workers in the private sector and employment status promised during 2018.
Not surprisingly, the government continues to tackle the use of disguised remuneration schemes, particularly in relation to loans.
Off-payroll working and employment status
A consultation will be published in 2018 on how to tackle non-compliance with the intermediaries’ legislation in the private sector, with the expectation that this will see the reforms introduced in the public sector this year extended to the private sector. A consultation will also be published as part of the government’s response to Matthew Taylor’s review of modern working practices.
While the unpopular April 2017 introduction of off-payroll reforms in the public sector were supposed to have been aimed at the likes of the BBC, it was always thought that this would be extended to the private sector before too long.
Reform of tax treatment of termination payments
As already announced, where an employee’s employment is terminated on or after 6 April 2018, they will not be eligible for foreign service relief on any termination payment. NICs will be due on termination payments from 6 April 2019.
Where employment contracts are being terminated, the timing and approach will need to be carefully considered in light of the new rules.
Following the call for evidence on employee expenses published in March 2017, a number of new measures will be introduced:
- The concessionary travel and subsistence overseas scale rates will be placed on a statutory basis on and after 6 April 2019;
- From April 2019, employers will no longer be required to check receipts when making payments to employees for subsistence using benchmark scale rates;
- HMRC guidance on employee expenses will be improved.
It was also announced that the government will publish a consultation in 2018 on extending the scope of tax relief available for work-related training costs for employees and the self-employed.
Not having to check receipts for benchmark scale rate expenses will reduce the administrative burden for employers, and will be a welcome improvement to the system. There is already a large amount of HMRC guidance relating to employee travel and subsistence expenses but there is always room for improvement particularly if it helps employees to claim tax relief they are rightly due.
Extending the scope of tax relief for work-related training will correct the existing mismatch in current legislation where it is not a taxable benefit where the employer pays for training, but where there is no tax relief where the employee pays for it directly.
Company car changes – diesel cars
The budget announced an increased of 1% to the supplement used to calculate company car tax and car fuel benefit charge where an employee is provided with a diesel car available for private use. This change will be effective from 6 April 2018.
It was also confirmed that the carbon dioxide emission regime currently used by HMRC will continue until April 2020 but will be replaced by the Worldwide Harmonised Light Vehicle Test Procedure from then on.
The increase in the diesel supplement is a move intended to reduce the use of diesel cars in the company car market, with a view to impacting air quality.
Tackling disguised remuneration
Further measures have been announced to tackle existing – and to prevent future – use of disguised remuneration tax avoidance schemes, with:
- Plans to tackle schemes used by close companies to remunerate staff; and
- The requirement of individuals who have received a disguised remuneration loan after 5 April 1999 to provide information to HMRC by 1 October 2019.
The Chancellor announced in the Budget that legislation will be introduced to ensure that all disguised remuneration schemes are within the charging provisions. It will also ensure that, where the employer is offshore, there are provisions to make sure that liabilities can be collected.
This government is determined to crack down on disguised remuneration schemes and these measures just add further nails in the coffin of tax avoidance in the area of employment.