Budget 2016 – Employment Taxes

Changes to employee share schemes

A measure has been brought in to simplify the law relating to rights issues on shares which were acquired via the exercise of an Enterprise Management Incentives option. A rights issue on such shares will be treated in the same way as any other rights issues.  This simplifies a small and specific quirk in the system.

But while small quirks in the EMI system may have been ironed out, the very generous relief from Capital Gains Tax for Employee Shareholder Status (ESS) shares has been significantly reduced.  From midnight tonight, any new ESS shares will only be exempt from Capital Gains Tax on the 1st £100k of gains.  Any excess is now subject to CGT.  Previously any gains from ESS shares, no matter how high the amount, were completely exempt from tax.

 

Clamping down on “off payroll” arrangements in the public sector

The government announced at Budget 2016 that it will reform the intermediaries legislation (known as IR35) for public sector engagements. The liability to pay the correct employment taxes will be moved from the worker’s own company to the public sector body or agency / third party paying the company. HMRC will develop a new tool that will make the decision on whether or not the rules should apply as simple as possible and provide certainty. A formal consultation will be published later.

 

Continued crackdown on disguised remuneration schemes

The Chancellor announced today that the government will take action to ensure those who have used “disguised remuneration” tax avoidance schemes pay their fair share of tax and National Insurance.

There are many types of disguised remuneration schemes. Most seek to pay an individual in the form of a loan that is not subject to Income Tax or NICs.  Often an employer would use an Employee Benefit Trust as a third party.

The Government do not define what constitutes a “disguised remuneration scheme” and it is left deliberately wide and can cover “schemes” involving self employment (not yet defined).

The government’s view is that these schemes don’t work and it is committed to continuing to take action, including changing the law, to prevent these schemes from being used. Specific legislation was introduced as far back as 2011 to tackle such arrangements.  HMRC is aware of arrangements which seek to sidestep the 2011 rules.  Therefore a package of changes was announced by the Chancellor at Budget 2016 to tackle the continued use of disguised remuneration schemes and the use of other similar avoidance schemes, including any involving self-employment.

A technical consultation will take place over the summer on how these objectives can be achieved, including draft legislation and a widening of the ability for HMRC to chase the employee for outstanding PAYE and NIC if it cannot be collected from the employer.  Legislation will also be introduced to put beyond doubt that all loans or debts from a disguised remuneration scheme will be taxed as earnings if they haven’t already been fully taxed or repaid on or before 5 April 2019.

 

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Nov 25

No events today
The partners and I wanted to thank you again for your work this year on our behalf. We have found, since changing to your firm some time ago, that our lives have been made so much easier! We are very impressed and grateful for your attention to detail, your understanding of our practice and general practice in the whole, the sheer speed and helpfulness of your responses to our requests, questions and need for help. It really does make a difference to have a firm of accountants that understand general practice and the problems that we face, especially recently. We find the meetings with yourselves pleasant, easy to understand and easy to see where we can make improvements. I wish all GPs had accountants like yourselves! I am always happy to recommend to you friends and colleagues and would be more than happy for you to share this personal and practice recommendation with others.   Dr Andrew Dearden Roathwell Surgery (Senior Partner) and Treasurer of the British Medical Association (BMA)
-- Dr Andrew Dearden