Employment law implications following the Budget

2016-03-24 chris posted:

With the Budget announced last week you may be wondering what the employment law implications are and how they might affect businesses. Below is a summary of the main points to be mindful of.

Termination payments

From April 2018, termination payments that are subject to income tax on amounts in excess of £30,000 will be subject to employer national insurance contributions. The £30,000 exemption will remain and the whole termination payment will be outside the scope of employee NICs.

In addition, legislation will be introduced to ensure that all payments in lieu of notice and certain damages payments are taxed as earnings.

Salary sacrifice

In light of concerns about the growth of salary sacrifice arrangements, the government announced that it is considering limiting the benefits that attract tax and NICs advantages when provided as part of a salary sacrifice arrangement. The government confirmed, however, that salary sacrifice for enhanced employer pension contributions, childcare benefits and health-related benefits, such as the cycle to work scheme, would continue to benefit from tax and NICs relief if provided through salary sacrifice.

Apprenticeship levy

Under the proposed apprenticeship levy (to be introduced from April 2017), employers will receive a government payment equal to 10% of their monthly apprenticeship levy contributions that will be available for them to spend on apprenticeship training. Further details are expected in April 2016.

Benefits in kind

Some benefits are taxed when they specify the amount of the taxable benefit. These include living accommodation, cars, vans and related benefits, and beneficial loans. The rest are taxable on the cost to the employer of providing the benefit. In the latter case, if the employee reimburses the employer the cost of providing the benefit, there is no tax to pay as the employee has made a fair bargain. Legislation will be introduced in 2016 to put beyond doubt that the fair bargain concept does not apply to the above-mentioned benefits.

Tax-free childcare

The government confirmed that it will launch the new tax-free childcare scheme in early 2017, but that the existing employer‑supported childcare voucher scheme will remain open to new entrants until April 2018 (previously, it was anticipated that the existing scheme would close once the new scheme launched). Accordingly, employees joining an employer-supported childcare voucher scheme before April 2018 will be able to access the associated tax and NICs benefits for so long as the employer maintains the scheme. Many employers provide childcare vouchers through salary sacrifice arrangements whereas the new scheme is not operated via employers. The change to the new scheme could therefore have significant cost implications for employers.

Consultation on simplifying PAYE settlement agreements

The government will consult on the simplification of the process of applying for and agreeing PAYE settlement agreements over the summer. This is in response to the Office of Tax Simplification's review of employee benefits and expenses.

Travel and subsistence rules

Following a consultation that ran from September until December 2015 on the reform of the tax rules for travel and subsistence, the government has announced that it does not intend to change the rules.

The draft Finance Bill 2016 legislation to prevent workers employed through intermediaries from receiving tax free reimbursement of travel and subsistence in circumstances where direct employees would be liable to tax, published on 9 December 2015, is unaffected by this decision and will be enacted as expected.

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