The taxation of off-payroll workers and the link between employment status and tax continue to be the subject of review with a discussion paper and consultation announced.
The Budget confirmed that the previously announced reforms to the national insurance contributions (NICs) system have been delayed for a year. The NIC rates remain unchanged.
The Government has found evidence of some employers abusing the Employment Allowance. Measures will apply from 6 April 2018 to counteract this.
The abuse of the Employment Allowance is often done by using offshore arrangements. From 6 April 2018, upfront security will be required from those employers with a history of doing this. This measure is only expected to raise up to £15 million a year.
"Taking security upfront from those employers who have a history of abusing the Employment Allowance demonstrates a continued intention by HMRC to crack down on tax avoidance."
The Government has moved to clarify when the disguised remuneration rules apply in the context of close companies. It is also refining the previously announced loan charge rules to assist with the efficient collection of taxes due under those rules.
"These measures will come as a welcome clarification by taxpayers. They also demonstrate the Government's continued focus on collecting the taxes due under the loan charges rules, even where employers are outside the scope of existing withholding tax regimes. It also shows a continuing trend in requiring disclosure to be made to HMRC."
The Government has confirmed its previously announced changes to Class 2 NICs and the NICs treatment of termination payments and sporting testimonials.
As previously announced, there will be a delay in implementing these changes for a year. This is to allow time to involve relevant parties in the details of the changes and then to implement the changes. The changes will see the abolition of Class 2 NICs paid by self-employed individuals. They will also align the NICs treatment of termination payments with the tax treatment, which will result in a greater liability on payments in excess of £30,000. The change relating to sporting testimonials will result in a maximum one-off payment of £100,000 being NICs free.
"The changes are aimed at simplifying NICs legislation. The changes relating to termination payments and sporting testimonials will ultimately bring the NICs position in line with the tax treatment. The delay to the Class 2 NIC withdrawal will allow time to consult on the impact on those on low incomes who could otherwise lose benefit entitlement where they do not earn enough to pay Class 4 NIC."
The Government will publish a discussion paper as part of the response to Matthew Taylor’s review of employment practices in the modern economy.
The discussion paper will consider the options for longer-term reform to make the employment status tests for both employment rights and tax clearer. The Government recognises that this is an important and complex issue, and has stated it will work with stakeholders to consider potential changes carefully.
"This is a very welcome step for employers and individuals seeking employment status clarification for the increasing number of individuals involved in the gig economy. The discussion paper is timely, coming off the back of some recent high profile employment status tax cases."
The Government is to consult on reforms to the rules on the engagement of workers via personal service companies in the private sector. Research is being commissioned that is due to be published in 2018. This follows major changes introduced for public sector engagements in April 2017.
The tax treatment of workers who provide their services via their personal service companies has come under close scrutiny from HMRC in recent years. HMRC’s concern is that specific legislation relating to such arrangements is not being complied with. The 2018 consultation will be to address how HMRC tackle non-compliance in the private sector.
The 2015 Budget announced proposals to review the 'intermediaries legislation' (commonly known as IR35). From 6 April 2017 new legislation was introduced in the public sector; the key impact being that the responsibility for determining the tax and NIC treatment moved to the public sector body or paying agency. The Treasury says that early results indicate increased compliance since the change and it is now considering similar reforms in the private sector.
"Following the change in April 2017 the announcement of a consultation is not surprising.
Any change in the private sector is likely to increase costs. Engagers are likely to review their current use of contractors and consider their viability going forward if the rules for private and public sector are aligned."
From 6 April 2018, there will be no taxable benefit in kind for employer provided electricity for charging employee vehicles.
There will also be RPI increases in the fuel benefit and van benefit charges from 6 April 2018.
Currently, employer-provided electricity for employees to charge their personal cars is a taxable benefit in kind. From 6 April 2018, there will be no benefit in kind charge for electricity provided in workplace charging points for electric or hybrid cars owned by employees. From April 2018, the scale charges applied to van benefits and to van and car fuel benefits will be increased in line with the September 2017 retail price index figures.
"As usual, the benefits are increasing slightly. The change to the tax treatment of the provision of electricity for employee vehicles is welcome as the present calculation may cause confusion and increased administration."
From April 2019 employers will no longer need to check receipts when employees claim benchmark scale rates. HMRC will work to improve guidance on employee expenses, with a focus on travel and subsistence, and the process of claiming tax relief when employer has not reimbursed expenses. There will be consultation on extending the tax relief for work-related training costs for employees and the self-employed.
Currently, even when employers reimburse employees for subsistence using benchmark scale rates they are still required to check receipts. From April 2019, this requirement will be removed. In addition, legislation will be introduced to replace the current concessionary scale rates that apply to accommodation and subsistence for overseas business trips. HMRC will improve its current guidance on employee expense, with a focus on travel and subsistence and the process by which employees can claim tax relief on expenses not reimbursed by their employer. The Government will also consult in 2018 and on the extent to which employees and the self-employed can claim tax relief on self-funded training costs.
"Removing the requirement to check receipts when reimbursing benchmark scale rates will remove a substantial administrative burden for employers. It now leaves it up to employers to decide if they wish receipts to substantiate expense claims when paying benchmark scale rates rather than imposed by HMRC. The legislating of the current concession on overseas expenses will give certainty to employers in respect of those costs.
Employers will also welcome clearer guidance on expenses, especially in relation to travel and subsistence costs which is a complex area if international travel is involved.
The process for employees to claim tax relief on expenses not reimbursed by their employer is not well known and many employees will be missing out on the relief.
The consultation on the tax relief for self-funded training will be closely watched by both employers and employees."
Employees on maternity and parental leave will be able to take up to a 12 month pause from saving into their Save As You Earn scheme, increased from the current 6 months.
Under Save As You Earn plan rules, monthly contributions should normally be made through deductions from pay. There is an exception for employees on maternity or parental leave, whereby they may currently pause contributions for up to six months without cancelling their membership from the scheme. This pause period will be extended to twelve months effective from 6 April 2018.
"This will be a welcome change for those employees on maternity and parental leave as it will allow continued membership of an often highly-valued savings scheme."