The Autumn Statement – key points for employers

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This is our ‘at a glance’ guide to the employment aspects of the Chancellor’s Autumn Statement and Spending Review delivered on Wednesday 25 November.

Apprenticeships levy

This levy (a levy on large employers to help meet the Government’s commitment to create 3 million new apprenticeships over the next 5 years) will apply to all employers whose annual paybill exceeds £3 million. The levy will be set at 0.5% on all pay.

The Government estimates that only 2% of UK employers will be affected but the announcement has, nonetheless, drawn strong criticism from business. Carolyn Fairbairn, the new director-general of the CBI, has called the apprenticeship levy a “sting in the tail” of the Spending Review describing it as a significant extra payroll tax on business. The Institute of Directors have taken a similar stance, saying that “the Chancellor cannot pretend the apprenticeship levy is anything but a payroll tax”. The Office of Budget Responsibility warned that employers were likely to pass the entire cost of the new tax on to their staff by suppressing pay rises.

Employers who are likely to be affected will need to start thinking about how they will absorb the impact on payroll costs especially given October’s above-inflation increase in the national minimum wage and the forthcoming national living wage for over 25s.

Employee share schemes

The rules on tax-advantaged and non-tax-advantaged employee share schemes will be simplified. This will include clarifying the tax treatment of shares and options awarded to internationally mobile employees to provide, where relevant, that the charge to tax will arise under the employee options rules rather than as earnings.

Salary sacrifice schemes

The Government will continue to monitor the use of salary sacrifice schemes and ‘disguised remuneration’ schemes and the associated cost in lost tax revenue. This is certainly ‘one to watch’ for employers using such schemes as they are likely to come under increased scrutiny over time.

Review of employment status

The Government intends to implement the majority of the proposals recommended by the Office of Tax Simplification (OTS) following its review of the legislation and practices surrounding employment status. These include the introduction of a statutory employment test, aligning tax and National Insurance contributions, withholding tax on gross payments to those not employed and HMRC to provide improved guidance.

Call for evidence on tax treatment of employer accommodation

The Government will publish a call for evidence on the current tax treatment of employer provided living accommodation. In particular, the Government is looking to simplify the legislation so that accommodation is taxed where it would reasonably be considered a ‘perk’ of the job rather than a necessity. Where the accommodation is taxable, the Government is looking to align the taxable benefit closer to full market rent.

Employment Tribunals

There will be a c£700 million investment to modernise and digitise the courts. Hopefully this will result in more efficient case management of employment claims and speedier outcomes for employers.

If you have any questions about any of the points in this briefing please contact David Smedley or Andrew Rayment.