UK Spring Budget 2021 – Employment and Pensions
With further consultations and policy announcements to potentially follow on 23 March, the employment and pension tax related announcements made in the Spring Budget 2021 were perhaps predictably limited in both number and scope.
Key highlights include:
Off-Payroll Working Rules
As expected, the government has confirmed that the proposed changes to the off-payroll working rules (IR35) for the public sector and for medium and large organisations and businesses will take effect from 6 April 2021.
As part of their announcement the government has also confirmed that a technical change will be made to the legislation to correct an unintended widening of the qualifying conditions for personal service companies. This change will make clear that a company in which a worker does not have a material interest will only qualify as a personal service company if the worker receives amounts from that company which are not wholly treated as employment income. This will be welcomed by many businesses who, for example, have implemented umbrella company solutions in response to the forthcoming changes.
Other technical changes announced include extending the consequences of providing fraudulent information to any UK based party in the labour supply chain, extending the requirement to confirm whether an intermediary satisfies the IR35 qualifying conditions to the intermediary itself, and introducing a targeted anti-avoidance rule that targets arrangements with a main purpose of circumventing the qualifying intermediary conditions to take an engagement outside of IR35.
Enterprise Management Incentives
HM Treasury have issued a Call for Evidence on enterprise management incentive (EMI) options, which are a particularly tax-advantaged form of share option available to companies which meet certain criteria, including having gross assets not exceeding GBP30 million and less than 250 employees at the time of grant.
The Call for Evidence asks for evidence in relation to whether the EMI scheme is fulfilling its policy objectives of assisting SMEs to recruit and retain employees, and to grow and develop, and views on whether EMI should be extended so that other companies can access it. It would have been helpful if this review also considered amending other barriers to accessing the tax reliefs associated with EMI, including excessive compliance obligations which often trip companies up. No doubt representations will be made in that vein.
On the theme of EMI options, HMRC have now also confirmed that the measures announced last year under which they agreed to accept that employees who are furloughed or on reduced working hours as a result of COVID-19 will be treated as still satisfying the working time requirement for EMI, will be extended until 5 April 2022. As before, this relaxation will apply in relation to both existing options and to new options.
Cycle to Work
Due to the government’s COVID-19 restrictions, requiring employees to work from home where possible, many existing users of cycle to work schemes will be unable to meet one of the qualifying conditions for the tax exemption that underpins such schemes, namely that the cycle is used mainly for qualifying journeys (to or from work or in the course of work).
Recognising this, the government has announced that it will temporarily relax this condition for employees who were provided with a cycle under a cycle to work scheme on or before 20 December 2020 in the expectation that the qualifying journeys condition would be satisfied. For those employees this condition will not apply until after 5 April 2022.
Importantly, this easement will not apply to employees who join a cycle to work scheme on or after 21 December 2020, who will need still need to satisfy all of the conditions for the exemption to apply.
COVID-19 Specific Tax Exemptions
Time extensions have been granted to two tax and national insurance exemptions put in place last year in light of the COVID-19 pandemic. These exemptions cover the reimbursement of home office expenditure incurred by employees to enable them to work from home as a result of the coronavirus outbreak and employer provided or reimbursed “coronavirus antigen tests” (which carry a specific definition).
Both exemptions were due to end on 5 April 2021 but due to the ongoing impact of the pandemic have been extended for a further year to 5 April 2022.
Should you have any queries on this summary, please reach out to your usual UK tax contact or one of the contacts below.