Off-payroll working in the private sector

The Chancellor made no mention of the off-payroll reforms for the private sector during the Budget speech, but the accompanying publications confirmed the rules will go live next month. The intention of these rules is that individuals who work like employees, but through their own company as contractors, pay broadly the same Income Tax and National Insurance Contributions (NICs) as individuals who are employed directly. Many contractors and businesses had been holding out for a deferral for a further year given the potential business disruption and additional costs expected to accompany their introduction.

The Treasury also announced technical changes to the proposed off-payroll working rules which aim to ensure the legislation operates as intended but the changes do not reduce the administrative burden of the new rules. Businesses now have 23 working days to complete their preparation for the changes on 6 April.

Whilst HMRC have signaled their intention for a “soft landing” regarding the imposition of penalties, organisations should ensure that they have the systems and processes in place to identify engagements that are potentially affected by the new rules, determine contractor status, manage information flows in their labour supply chains and operate payroll tax withholding appropriately on deemed employment income as required. This will be particularly pertinent for companies within the senior accounting officer regime, where a senior executive is obliged to certify the company has established and maintains appropriate tax accounting systems and processes.

Enterprise Management Incentives (EMI) related measures

HMRC confirmed last year that the favourable EMI tax treatment will be preserved for option holders who are on furlough or working reduced hours due to the pandemic. In welcome news this measure is now being extended until 5 April 2022 and individuals who are furloughed or who couldn’t satisfy the current statutory working time requirement for EMI as a result of COVID-19 will retain access to the scheme’s tax advantages.

In an encouraging move for Northern Ireland’s technology sector a call for evidence on EMI has been published to consider whether the existing tax advantaged EMI scheme should be extended to include more companies. Whilst it may take some time for the review to be concluded, the government seems open to considering how more UK companies could potentially access EMI to help them recruit and retain the talent they need to grow.

COVID-19 related home office expenses

The government will extend the temporary income tax and Class 1 National Insurance contributions exemptions for employer reimbursed expenses that cover the cost of relevant home office equipment. Home office equipment is the equipment deemed necessary for the employee to work from home as a result of the coronavirus outbreak, and can for example include a laptop, a desk or necessary computer accessories. The extended exemption will have effect until 5 April 2022.

Easement for employer-provided cycles exemption

The government will introduce a time-limited easement to the employer-provided cycle exemption to disapply the condition which states that employer-provided cycles must be used mainly for journeys to, from, or during work. The easement will be available to employees who have joined a scheme and have been provided with a cycle or cycling equipment on or before 20 December 2020.

The change will be in place until 5 April 2022, after which the normal rules of the exemption will apply.

UK VISA developments

Whilst not an employment tax matter the Government have also announced changes to various immigration routes which aim to attract “high skilled migrants” to the UK in a move designed to offer additional support the innovation and technology secto

The proposed changes include reforming the Global Talent visa, reviewing the Innovator visa and launching a new Global Business Mobility visa for overseas businesses to establish a presence in or transfer staff to the UK. In addition to this, a new fast track immigration route for those seeking to work in a “Scale Up” will be introduced by March 2022.

Th Global Talent and Innovator visas are relatively new immigration routes, as such the reform and review suggests that the routes are not operating as anticipated.

The impact of Brexit means that many employers will have to engage with the sponsor lead UK visa system for the first time. As such the announcement that the Government will introduce practical support to small firms that are using the visa system is positive.

Get in touch

If you have any queries on the topics covered above, please contact Eunan Ferguson, partner, KPMG in Belfast.