Budget 2020: Employment taxes and payroll overview

The big news was the change to statutory sick pay, and confirmation again that the off-payroll/IR35 administrative rules will change from 6 April 2020. Many of the other items covered had already been announced.

To support people affected by COVID-19

Statutory sick pay (SSP) will now be available for eligible individuals diagnosed with COVID-19 and those who are unable to work because they are self-isolating in line with government advice. This support is in addition to the change announced recently that SSP will be payable from day one instead of day four for affected individuals.

People who are advised to self-isolate for COVID-19 will soon be able to obtain an alternative to the usual GP fit note by contacting NHS 111, rather than visiting a doctor. This can be used by employees where their employer requires evidence. Further details will be confirmed shortly.

The Government will bring forward legislation to allow small and medium-sized employers to reclaim SSP paid for sickness absence due to COVID-19. Existing systems are not designed to facilitate employer refunds for SSP, so necessary changes will be introduced shortly.

The eligibility criteria for the scheme will be as follows. 

  • The refund will cover up to two weeks’ SSP per eligible employee who has been off work because of COVID-19.
  • Employers with fewer than 250 employees will be eligible - this will be determined as of 28 February 2020.
  • Employers will be able to reclaim expenditure for any employee who has claimed SSP (according to the new eligibility criteria) as a result of COVID-19.
  • Employers should maintain records of staff absences, but employees will not need to provide a GP fit note.
  • The eligible period for the scheme will commence the day after the regulations on the extension of SSP to self-isolators comes into force.
  • The Government will work with employers to set up the repayment mechanism for employers as soon as possible. 

Off-payroll working/IR35

As announced in Budget 2018, and following the recent government review, reform of the off-payroll working rules in the private and third sectors will be legislated in Finance Bill 2020, due to be published on 19 March, and implemented from 6 April 2020.

Company cars and vans

Company car tax changes were given the green light in the Budget, confirming the announcements made on 2 March 2020, that: 

  • the van benefit charge and the car and van fuel benefit charges will increase by the consumer price index from 6 April 2020;
  • the flat-rate van benefit charge will increase to £3,490;
  • the car fuel benefit multiplier will increase to £24,500; and.
  • the flat-rate van fuel benefit charge will increase to £666.

Following the treasury report last year, company car drivers who choose a new emissions-free electric model after 6 April will pay no benefit-in-kind tax for 2020/21 as part of new efforts to encourage motorists to switch to green vehicles.

The Government is considering the long-term future of incentives for zero-emission vehicles alongside the 2040 phase-out date consultation. Until then the Government will provide £403 million for the Plug-in Car Grant, extending it to 2022/23, recognising that the market for other ultra-low emission vehicles is still very small. An announcement was also made on electric charging points, which will mean that nobody will ever be more than 30 miles away from a charging point, and should see an increase in employers moving their fleets towards electric vehicles.

Employment allowance 

As previously announced, from April 2020 the employment allowance (EA) will increase from £3,000 to £4,000. This will reduce the costs of employment for around 510,000 businesses, with an average gain of £850 per year. As announced at Budget 2018, a new restriction on EA will be introduced. Employers will only be eligible for EA if their total secondary Class 1 National Insurance contributions (NIC) liability in the previous tax year was under £100,000.

A number of administrative changes are being introduced at the same time as the EA restriction, which all employers must consider. The key change is that employers will have to claim EA every year in order to receive it. Another result of restricting EA to smaller employers is that, from April 2020, EA will be classed as state aid.

The Government will also introduce a NIC holiday for employers of veterans in their first year of civilian employment.

Employee welfare

A welcome change for many employers will be the extension of the current exemption for welfare counselling facilities provided by employers to employees. Currently, the provision by an employer of counselling facilities to employees can be exempt from tax and NICs, but the exemption is tightly drawn, with only certain types of counselling qualifying, and a general rule that related medical treatment does not qualify for exemption.

The exemption will, however, be extended to include related medical treatment from 6 April 2020 where this is provided to an employee as part of an employer’s welfare counselling services. While the announcement has given the example of cognitive behavioural therapy as a type of medical treatment covered by the extended exemption, we will have to wait and see how this will work and what types of medical treatment will qualify.

Homeworking

The Government has also announced an increase in the maximum amount of flat-rate payments employers can make to employees to reimburse the additional cost of household expenses they incur while working at home under a homeworking arrangement (ie where there are arrangements between an employer and the employee under which the employee must work at home regularly).

The additional costs an employee incurs can be difficult to calculate and so, to address this problem, employers have for several years been able to make a maximum tax and NIC free flat-rate payment of £4 per week to employees to cover these costs, without the employee or the employer having to justify that amount.

With effect from 6 April 2020, the Government will increase the maximum flat-rate payment that can be made to £6 per week. It remains to be seen whether HMRC will accept that a homeworking arrangement exists, and this amount can be paid tax and NIC free, where an employee works at home while self-isolating during the coronavirus outbreak.

Tackling construction industry scheme (CIS) abuse

The Government plans to legislate to prevent non-compliant businesses from using the CIS to claim tax refunds to which they are not entitled. It is also publishing a consultation which introduces options on how to promote supply chain due diligence. 

For more information please contact

Susan Ball Susan Ball

Partner