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  • Budget 2020 - Employment Taxes

Budget 2020 - Employment Taxes

12 March 2020

Off-payroll working in the private sector to go ahead

The main employment tax matter and the one of most interest to businesses was confirmation that reform of the Off-Payroll Working rules, the IR35 changes, will be going ahead from 6 April 2020.

Although this did not feature in the Chancellor’s speech, the Budget notes include a brief section that confirms the IR35 changes will go ahead and explains that “it is right to address the fundamental unfairness of the non-compliance with the existing rules”.

A recent implementation review was undertaken by HM Treasury which then announced some amendments and clarifications, in particular around contractors operating outside the UK. There was also a promise of further HMRC guidance. However, no change in direction or wholesale alterations were announced. The review report confirmed that where necessary the draft legislation will be updated. 

Businesses, organisations, labour providers and contractors potentially affected by the changes should now continue to prepare for the changes. There will be significant HMRC compliance activity in this area once the reforms have been implemented despite the review confirming a ‘soft landing’ on penalties in the first year of operation.  

Further details on the IR35 reforms and how businesses and organisations can prepare can be found here.

Statutory Sick Pay changes for workers and employers and Employment allowance increase

As part of the Government response to Coronavirus, a number of measures have been introduced to Statutory Sick Pay (SSP) which are effective from 6 April 2020. The measures include:

  • All employees who self-isolate will be able to claim SSP
  • As a temporary measure SSP claims can be made from day 1 rather than day 4
  • Employees who are caring for someone who is self-isolating will also be able to claim SSP on this basis
  • Businesses with less than 250 employees as at 28 February 2020 will be able to reclaim SSP expenditure up to a maximum of two weeks per employee from the Government. This measure will commence from the date the new regulations for SSP are announced.

The current rate of SSP is £94.25 per week, rising to £95.85 from 6 April 2020.

SSP is currently payable to employees with earnings over £6,136 (£6,420 per annum from 6 April 2020). For employees below this threshold, such as those in the gig economy and the self-employed, the Government has announced additional measures that include:

  • The ‘New style’ Employment and Support Allowance will be payable for people directly affected by Coronavirus or self-isolating according to government advice from the first day of sickness
  • People will be able to claim Universal Credit and access advance payments where they are directly affected by Coronavirus, or self-isolating, without the current requirement to attend a Jobcentre
  • For the duration of the outbreak, the requirements of the minimum income floor in Universal Credit will be temporarily relaxed for those directly affected by Coronavirus or self-isolating ensuring self‑employed claimants will be compensated for losses in income

In addition to SSP changes, the Government also confirmed the planned increase in the Employment Allowance from £3,000 to £4,000 from 6 April 2020.

Review of Enterprise Management Incentives

The Enterprise Management Incentives (EMI) scheme is an tax-advantaged share option scheme which aims to recruit, retain and incentivise employees in fast growth companies. The granting of EMI share options is often a key factor in the success of many smaller, fast growth companies.

The government wants the EMI scheme to help high growth companies scale up by recruiting and retaining the best talent. It will examine whether more companies should be able to qualify for the scheme. BDO welcomes the intention to extend the EMI scheme, given its beneficial impact on the SMEs and will participate in the consultation process.