Budget 2016: A look at the key headlines for employment, recruitment and pensions

The Chancellor’s themes in this year’s Budget Statement focused on boosting enterprise, putting the next generation first, and helping working people keep more of the money they earn. 

Growth forecasts have been revised down for the next three years. Growth is forecast to be 2% in 2016, down from 2.4% in the Autumn Statement. GDP is predicted to grow 2.2% and 2.1% in 2017 and 2018, down from 2.4% and 2.5% forecast in the Autumn Statement. 

Employment headlines

  • Abolition of Class 2 NICs for the self-employed;
  • Annual threshold for small business tax relief to be raised from £6,000 to a maximum of £15,000;
  • A million jobs forecast to be created by 2020;
  • From 2018 termination payments over £30,000 will be subject to employer’s NICs.

The announcement in respect of the taxation of termination payments is perhaps of greatest interest in that wide ranging changes had been anticipated following consultation last year. 

The government is saying that it will seek to tighten the scope for “manipulation” of the exemption which applies to compensation/termination payments but the fact that there is still reference to the £30,000 exemption being in place in April 2018 indicates that the Chancellor has pulled back from more radical reform.  

Recruitment headlines

Businesses operating in the recruitment sector are likely to be affected by several announcements made in the Chancellor’s Budget Statement for 2016. The Red Book (published to accompany the Statement) contains further details of the Government’s plans that should be noted.

Of key significance to the recruitment sector is the following:

  • Anti-tax avoidance and evasion measures to raise £12bn by 2020;
  • Revised limits to the range of benefits that attract income tax and National Insurance Contribution advantages when they are provided as part of salary sacrifice schemes; 
  • Introduction of further measures to 'tackle' Disguised Remuneration Schemes. The Red Book confirms that: “Legislation will be included in Finance Bill 2016 which will prevent a relief in the existing legislation from applying where it is used as part of a tax avoidance scheme from Budget day (16 March 2016)…”.  The Red Book goes on to confirm that there will be other proposed changes which the Government will consult over and which will be included in a future Finance Bill; 
  • Changes to tax responsibilities and liabilities where a worker is providing services in the public sector through a personal service company;
     
  • The Chancellor has confirmed that the long-awaited T&S scheme changes will be implemented as from 6 April 2016;
  • Please also see the key announcements listed in our “Employment Headlines” section above, which may also affect your business.

What do the changes mean for businesses operating in the recruitment sector? Whilst there are some beneficial changes for businesses that have been announced, employment businesses and end user clients will no doubt have concerns regarding the proposed changes concerning personal service company workers providing services in the public sector. In particular, the Red Book confirms that:

“Some individuals who work through their own limited company are undertaking jobs that would ordinarily mean they are employees of the business that they are working for. In those circumstances, existing legislation on off-payroll working requires them to pay broadly the same taxes as employees. However, non-compliance with these rules is costing the taxpayer around £440 million a year – and these costs are rising.

Public sector bodies have a responsibility to taxpayers to ensure that the people working for them are paying the right tax. From April 2017, where the public sector engages an off-payroll worker through their own limited company, that body (or the recruiting agency if the public sector body engages through one) will become responsible for determining whether the rules should apply, and for paying the right tax…”

Although this change will only take effect in 2017, it raises new issues and concerns for employment businesses supplying these workers and for end user clients who require use of such services.

Posted: Thu 17 Mar 2016
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