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NumberMill releases summary of Budget legislation changes

Numbermill has compiled a list of legislation changes in the 2016 Budget relevant to the recruitment industry.


Below are the main provisions, outlined by Louise Rayner, CEO of the accountancy company.


Employment Allowance - From 2018 the Government will have the power to remove one year’s employment allowance from employers that hire illegal workers and receive a civil penalty. Para 2.24


Termination Payments -At present termination payments above £30,000 are subject to income tax. From April 2018 these payments will also be subject to employer’s NI contributions. Para 2.26


Travel and Subsistence (general – not the intermediaries rules) – In September 2015 the Government launched a discussion paper looking at the travel and subsistence regime to see if it could be simplified. Following this discussion paper the Government has decided not to make any changes as they see the current regime as complex but largely understood. As stated this is not the same as the travel and subsistence (intermediary) rules due in April 2016 (see below). Para 2.38


Travel and Subsistence (Employment Intermediaries) – The Government has announced that it will press ahead with the changes to T&S claims made by individual engaged via employment intermediary arrangements.  At page 89 of the budget they have outlined what they believe the revenue will be from the new measure. We still await the final legislation. Para 2.39


Dividend Tax – The Government has confirmed that it will press ahead with the changes to the taxation of dividends announced in the summer budget 2015. Para 2.41


Probably the most pertinent proposal from the budget today: IR35 changes for the Public Sector only?


The budget included some further details in relation to the Government’s plan for Personal Service Companies (PSCs). You will all recall, in the previous budget, the Chancellor announced a discussion document in relation to the intermediaries legislation (IR35). It would seem this has progressed to a further proposal for a consultation, but this time specifically targeted at the public sector.


The new proposal (which is yet to be subjected to a full consultation) states:


From April 2017 a public sector body will be responsible for deciding whether the intermediaries legislation applies to an engagement they have with a PSC. Where the services are provided through an agency or other third party it will be the responsibility of the party paying the PSC to assess the position. The entity paying the PSC will have to deduct the correct tax and NI on the deemed payment (calculated in accordance with the current rules) and account for this via their own RTI returns. Needless to say the criteria for determining whether IR35 applies or not to a particular contract are complex enough, the deemed employment income calculation is almost as complex!  This may well prove to be some challenge for public bodies. This is a bold move by the Government given the fact that public bodies combined are probably the largest engagers of PSCs.  The move shows the intent of the Government is to clean up their own house before possibly expanding the remit to other sectors.


We have seen this some years ago when Business Entity Tests were introduced in the public sector. It proved too cumbersome and died a death. I wonder if this is more of a Government PR exercise


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