Irwin Mitchell | Employment Law Update | The employment implications of the March Budget

The debacle around changes to welfare benefits has overshadowed a number of announcements which will affect employers and their staff.

Tax and NICs rules for pay-off

From April 2018 employer NICs will be due on termination payments above £30,000 that are already subject to income tax. The first £30,000 of a termination payment will remain exempt from income tax and the full payment will be outside the scope of employee NICs.

Plus, legislation will be introduced to ensure that all payments in lieu of notice (both contractual and non-contractual) and some damages payments will be taxed as earnings. There will be a further consultation later on this year, but these changes are part of the government’s stated desire to make the tax and NIC treatment of termination payments “simpler and fairer”. The jury is out on whether it will do so.

Salary sacrifice

The government wants to encourage employers to offer certain benefits but is concerned about the growth of salary sacrifice schemes. It is considering limiting the range of benefits that attract income tax and NICs advantages when they are provided as part of salary sacrifice schemes. However, the government’s intention is that pension saving, childcare and health-related benefits such as Cycle to Work should continue to benefit from income tax and NICs relief when provided through salary sacrifice arrangements.

However, the childcare voucher scheme will be closed to new entrants from April 2018.

Apprenticeship levy

Under the proposed apprenticeship levy, employers will receive a government payment equal to 10% of their monthly apprenticeship levy contributions that will be available for them to spend on apprenticeship training.

Employee shareholder status (ESS)

The Budget introduces an individual lifetime limit of £100,000 on gains eligible for CGT exemption through ESS. This limit will apply to arrangements entered into on or after 17 March 2016 and will not apply to arrangements already in place.

Extension of Shared Parental Leave to grandparents

The government announced that it will launch a consultation in May 2016 on how to implement its shared parental leave and pay to working grandparents. The consultation will also offer options for streamlining the shared parental leave and pay system including simplifying the eligibility requirements and notification system. It is not yet known if the parent will have the option to include a grandparent as well as their co-parent or if they must choose one or the other. If it is the former, it will complicate what is already an extremely complex regime (and potentially involve co-operation between three different employers).

Loss of NIC’s allowance for employers of illegal workers

From April 2017, employers will be denied the employment allowance for a period of one year if they are subject to a civil penalty for employing illegal workers.


Employment Law Update - April 2016

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Alex Barnes