News release

Autumn Budget 2018: Justin Rix – Employment Tax

Justin Rix, Tax Practice Leader commented:

“Today’s budget saw the chancellor announce just a handful of measures directly impacting employers. The reform to deemed ‘off-payroll working’ was widely expected and was more a question of when not if. Broadly the reforms, which were introduced for Public Sector employers in April 2017, transfer the responsibility for determining whether an individual working off the payroll should be taxed as an employee to the employer. Prior to the reform this would not have been the case where an individual provided their services through a Personal Services Company or other intermediary.

“The extension of these rules to medium and large private sector businesses will be introduced from April 2020, perhaps acknowledging calls from business to provide enough time for them to introduce the changes required to comply with the new rules.

“It is understandable that the chancellor wants to find ways to ensure that HMRC can efficiently collect tax and pushing this responsibility away from individuals and on to employers is a way to do this, however, it overlooks the fundamental need to align the definition of employee for legal and tax purposes. In addition, this measure does not reflect the current and evolving ways of working in the UK as we shift towards a gig economy and we would call for a fundamental review of the tax system to ensure it supports this.

“The other, less expected change was a reduction in the contribution from 10% to 5% for small employers funding apprenticeship levy approved training programmes. This announcement would appear to be aimed at trying to address criticisms that the introduction of the apprenticeship levy has resulted in a significant fall in the numbers of apprenticeships, particularly amongst small employers. Employers who have an annual wage bill of less than £3m do not have to pay the 0.5% levy, however, under the existing rules they do need to fund the first 10% costs for apprenticeship levy training, the 90% balance being met by government. Prior to the introduction of the levy many small employers would not have had to pay anything towards their apprenticeship programmes.

“It will be interesting to see whether this has a material impact on the number of small employers taking on apprenticeships given the broader concerns around the quality, flexibility and availability of training providers to support the apprenticeship programmes of smaller employers.”

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