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A Budget of few surprises

on Wednesday, 22 November 2017.

A Budget of few surprises

The Chancellor Philip Hammond has presented his Budget to Parliament.

Unlike in previous years, there were few surprises in this Autumn’s Budget. However, one of the biggest changes likely to be welcomed by payroll professionals are the updates to employee expenses rules.

Following the call for evidence published in March 2017, the government will make several changes to the taxation of employee expenses:

  • It will consult in 2018 on extending the scope of tax relief currently available to employees and the self-employed for work-related training costs.
  • From April 2019, employers will no longer be required to check receipts when reimbursing employees for subsistence using benchmark scale rates. The existing concessionary accommodation and subsistence overseas scale rates will be placed on a statutory basis, to provide greater certainty for businesses.
  • HMRC is to work with external stakeholders to improve the guidance on employee expenses, particularly on travel and subsistence and the process for claiming tax relief on non-reimbursed employment expenses.

Beyond these changes, many of the other announcements had already been tabled or were at least expected. One such example is that the government will consult on off-payroll working in the private section. Having already reformed off-payroll working rules (known as IR35) for engagements in the public sector, it is of little surprise that attention has turned to the private arena. The reforms ensure that individuals who effectively work as employees are taxed as employees, even if they choose to structure their work through a company.

The government will consult on how to tackle non-compliance in the private sector, drawing on the experience of the public sector reforms, including through external research already commissioned by the government and due to be published in 2018.

Another unsurprising development is the announcement that the government will publish a discussion paper as part of the response to Matthew Taylor’s review of employment practices in the modern economy. It will explore the case and options for longer-term reform to make the employment status tests for both employment rights and tax clearer.

As part of the push to make tax clearer, the government will reform the penalty system for late or missing tax returns, adopting a new points-based approach. It will also consult on whether to simplify and harmonise penalties and interest due on late payments and repayments. This will ensure that the system is fair, simple and effective across different taxes. Final decisions on both measures will be taken following this latter consultation.

Similarly, the drive to crack down on tax evasion and avoidance is continuing. The government has found evidence of some employers abusing the Employment Allowance to avoid paying the correct amount of National Insurance contributions (NICs), often by using offshore arrangements. To tackle this, HMRC will require upfront security from employers with a history of avoiding paying NICs in this way. This will take effect from 2018 and raise up to £15 million a year.

There were also some announcements that will effect employee benefits. The government has clarified that, from April 2018, there will be no benefit in kind charge on electricity that employers provide to charge employees’ electric vehicles. However, there will be a rise in the existing company car tax diesel supplement from three per cent to four per cent, with effect from 6 April 2018. The fuel benefit charge and the van benefit charge will both increase by RPI from 6 April 2018.

Changes have also been announced for Save As You Earn (SAYE) schemes. Employees on maternity and parental leave will be able to take up to a 12-month pause from saving into their SAYE employee share scheme, an increase from six months. The change will take effect from 6 April 2018.

Finally, from April 2019, tax relief for employer premiums paid into life assurance products or certain overseas pension schemes will be modernised to cover policies when an employee nominates an individual or registered charity to be their beneficiary.