Spring Budget: Employment taxes
By Justine Riccomini, Head of Tax (Employment and Devolved Taxes)
31 March 2023
Justine Riccomini looks at the employment tax developments arising from the Spring Budget of 15 March 2023 and other important news.
The 2023 Spring Budget contained four pillars of growth – one being employment. Most employment tax practitioners will probably be relieved after the utter chaos of the last three years with Brexit- and Covid-related changes, to hear that in this year’s Budget, only a small number of employment tax changes were announced. However, there were also some other important changes to employment tax guidance and processes, as well as some newsworthy items that employers and agents need to be aware of which were not included in the Budget but were announced just before and just after the Budget event. The Budget announcements themselves were aimed at addressing the reasons why older, “more experienced” groups have left the labour market and focused on assisting:
- long-term sick and disabled;
- welfare recipients:
- parents
This article sets out all the recent changes, regardless of where they appeared.
Compulsory online completion of Forms P11D
The February 2023 edition of Employer Bulletin set out that from 6 April 2023, it will be compulsory to file P11Ds (including P11D(b)) online and not on paper. It is vital that all employers except those who are exempt (such as those with religious objections) understand their obligations because the P11Ds for 2022/23 are included in this mandatory exercise, despite the extremely short notice.
Paper amendments to P11Ds are also not allowed and HMRC has stated that it will be launching an online portal to submit amendments through – and hopefully more information on this will be available in the April edition of Employer Bulletin. There are issues with bulk amendments, digitally excluded employers and individuals with no NINO (such as ex-pat employees) which ICAS hopes HMRC will clarify before 6 July.
The Government is also to introduce IT which enables agents to payroll benefits in kind for clients which ICAS understands will coincide with the removal of paper P11Ds from 6 April 2023 (i.e. for P11Ds covering the 2022-23 tax year).
Beneficial loan interest rates change from 6 April 2023
The official rate at which interest is charged on interest-free and low-interest loans is increasing from 2.00% to 2.25%.
Further information on beneficial loans can be found at Booklet IR480, Chapter 17.
Enterprise Management Incentive (EMI) Schemes
On Budget day, a Tax Information & Impact notice (TIIN) was published relating to improvements to the process of granting EMI options. HMRC confirmed that:
“The changes which apply from 6 April 2023 will:
- remove the requirement for the company to set out within the EMI option agreement the details of any restrictions on the shares to be acquired under the option;
- remove the requirement for the company to declare that an employee has signed a working time declaration when they are issued an EMI option. It does not remove the working time requirement itself.
From 6 April 2024, the government will also extend the deadline for notifying an EMI option from 92 days following grant to the 6 July following the end of the tax year. This will be legislated separately and the impacts will be set out at that point.”
Coronavirus Job Retention Scheme (CJRS)
The House of Commons Public Accounts Committee (PAC) recently noted in their February 2023 report that due to apparent lack of resources, HMRC have recovered a much lower amount of fraudulently claimed Covid employee furlough payments than expected, stating that “HM Treasury and HM Revenue & Customs moved quickly to put the schemes in place but were then too slow to better target support to those in genuine need, and tackle error and fraud. Levels of unrecovered error and fraud are far too high. HM Revenue & Customs has had little success in recouping the £2.3 billion incorrectly paid to employers claiming furlough for employees who continued to work. It is winding up the Taxpayer Protection Taskforce without recovering the money expected.”
Promoters of tax avoidance
The Chancellor doubled the maximum prison term for offenders convicted of promoting tax avoidance schemes from seven to fourteen years. This sends a clear message that these behaviours will not be tolerated as they represent damage to the public purse. Many schemes have historically been found to be in employment taxes and reward as well as extraction of profit.
Off-Payroll working guidance
In March 2023, HMRC published updated guidance on understanding off-payroll working arrangements which aim to clarify certain aspects and set things out in a clearer and simpler format, following discussions with the Employment Status & Intermediaries Forum.
In other news, the First Tier Tribunal has found in favour of Gary Lineker in his IR35 case and the Upper Tax Tribunal found in favour of HMRC in the Eamonn Holmes case – the fact patterns are of course different in each case, but once again we have two TV presenters with two different outcomes, which can lend itself to confusion in this area. A more detailed article will be coming out shortly on this and will be available in the May 2023 edition of CA Tax and published on icas.com.
Increasing occupational health coverage and tax incentives - consultation and pilot schemes to help SMEs purchase them
Following a piece of DWP research published on Budget day, the Government is consulting on the options for increasing occupational health coverage and running pilot schemes that will assist small and medium-sized businesses to fund the purchase of these policies, including what tax incentives might be available.
Strengthening employment rights
The government announced during the Budget that it will support a Private Member Bill providing day one rights to request flexible working. Additional Bills which grant specific groups protections or leave entitlements and include enhanced redundancy protection for pregnancy, family leave, carer’s leave, and neonatal care leave will also be supported. Other important Bills encompass ensuring all hospitality tips go to staff and workers having the right to request a contract with more predictable hours. It’s good to see these being addressed after a few years of uncertainty following Brexit and no Employment Bill forthcoming despite urgent lobbying.
Call for Evidence on informal flexible working - forthcoming
The government will bring forward a call for evidence to launch in Summer 2023 on informal and ad hoc flexible working to better understand informal agreements on flexible working between employees and employers.
Taxation of new social security benefits by the devolved administrations - new powers
The UK Government issued powers to the devolved administrations on Budget day to enable the tax treatment of new payments or new top-up welfare payments, introduced by the devolved administrations to be confirmed as taxable social security income through secondary legislation.
Tax treatment of carer’s support payment in Scotland
The Scottish Government announced the payment of carer’s support payment on 7 February 2023 and the UK government has undertaken to clarify the tax treatment of the payments as categorised as taxable social security income.
Seafarers’ Wages Act 2023
The Seafarers’ Wages Act was introduced by the UK government with a view to stopping another “P&O” style incident happening – readers will recall the 2022 dismissal of over 600 P&O workers which led to the government’s “9-point plan”. The Bill received royal assent on 23 March 2023 and aims to ensure maritime workers onboard vessels that regularly dock in UK ports are paid at least the UK National Living Wage. Whether this legislation is sufficient remains to be seen – it may be the case that additional agreements with other countries will need to be implemented to square the circle.
Let us know your views
We welcome members’ input on consultations or other tax-related matters – email tax@icas.com to share your insights and feedback. ICAS responds to many tax calls for evidence and consultations, as well as producing tax policy papers and reports. We also regularly attend meetings with HMRC at which service levels, delays and other issues are discussed, and we raise problems being encountered by members.