Change is constant in HR, but recent Government announcements suggest that HRDs will arguably have more to chew over than usual in the coming months.
During Philip Hammond’s first, and last, Autumn Statement he announced that the Government is to introduce IR35 tax changes, which will result in Personal Service Company contractors in the public sector losing their right to determine their tax status. For HR professionals working within the public sector this move is likely to create not only increased administration, but also shortages of specialist talent and increased headcount cost.
A survey of independent professionals undertaken in July this year by IPSE, a membership body for independent professionals and the self-employed, revealed that 39% of respondents would work on public sector contracts but would increase their day rate to compensate for the extra tax liability. The same survey showed that over 50% of respondents would refuse to work on public sector contracts – or would terminate contracts if required to pay tax and NICs as an employee when delivering services independently.
There are also proposed changes with regards to permanent employees with Hammond outlining series of changes to the tax system. The Government has pledged to scrap income and capital gains tax relief for shares awarded under Employee Shareholder Status (ESS), just three years after the scheme was introduced, due to evidence suggesting it is mainly being used for tax planning.
The Chancellor has also announced the removal of tax and NI benefits for salary sacrifice schemes, with the exception of childcare, cycle to work and ultra-low emissions cars schemes and pensions. The Government’s previous pledge to up the personal allowance and higher tax rate threshold still stands.
Employer and employee NI thresholds are also due to be aligned – the insurance premium tax will rise to 12% from 10%; while the taxation of people working in different structures is set to be equalised.
One thing the Autumn Statement didn’t offer was an update on the Making Tax Digital consultations, which is unsurprising when you consider that the proposals received over 3,000 responses by the consultation deadline. The Government has, however, committed to publishing a response in January. I will, of course, keep you updated.