Phillip Hammond’s autumn statement has announced several important changes in the employment law sphere.
The government has announced a dramatic roll-back from its much heralded employer shareholder scheme of 2013. They say the reason for this is that it has been used for “tax planning”. This is because there were certain tax reliefs if an employee was willing, in return for a minimum of £2,000 shares in a company, to forego certain employment rights such as the right to redundancy payments and unfair dismissal.
The Capital Gains Tax relief was limited to a lifetime allowance of £100,000 in March, but the government now wishes to abolish this relief altogether. This will come into effect on 1 December 2016, giving companies planning employee shareholder schemes very little notice.
The government intends to close down employee shareholder status completely “at the earliest opportunity”.
Salary sacrifice schemes
The government is going to limit the types of payments made under salary sacrifice schemes to payments made for childcare benefits, cycling, and ultra-low emission cars. Enhanced employer pension contributions to registered schemes will also be allowed. Otherwise, salary sacrifice schemes will be prohibited from April 2018 onwards. At that point the above costs will only be allowed and, in addition, payments in respect of cars, accommodation and school fees, but only until April 2021.
Employers running salary sacrifice schemes will want to review matters, therefore. The principal area for concern will be employees pension contributions and it appears that National Insurance relief will no longer be available if these are made by way of a salary sacrifice scheme.
Payments in lieu of notice
The government has been consulting over whether payments in lieu of notice should actually be taxable. Employers who do not have a contractual right to make payments in lieu of notice have usually paid these without deductions for Tax and National Insurance, up to the current threshold of £30,000.
In April 2018, all this will change, and tax at a basic rate will need to be made on all payments corresponding to the earnings the employee would have received had they worked their notice. The same would apply to commissions and bonuses over this period. This is an important change, and you will be hearing more from us about this nearer the time.