What did the Autumn Statement say for employers? Apprenticeship levy, working families, ill health and employment status all on the table

George Osborne delivered his Autumn Statement and Spending Review today confirming his desire to “move Britain towards a higher wage, lower tax, lower welfare society”.

Central to this is the already well publicised commitment to the National Living Wage, due to be introduced next April and increases to the income tax personal allowance to effectively make this “tax free”. He also announced that the gender pay gap was at a “record low” – although employers are still awaiting the Government’s response to the recent consultation on the new obligation to publish a company’s gender pay gap expected to come into force next year. The two real surprises were the unexpected U-turn on abolishing tax-credits and a new “pot-hole” fund – the latter of which received some predictable chortling from the members of Parliament.

However, there was more detail in the bag for employers on some of the employment related aspects the Government has been reviewing:

• New Apprenticeship levy: The apprenticeship levy will be introduced in April 2017. It will be set at a rate of 0.5% of an employer’s pay bill and will be paid through PAYE. Each employer will receive an allowance of £15,000 to offset against their levy payment. This means according to the Government Autumn Statement and Spending Review that the levy will only be paid on any pay bill in excess of £3 million. The Government’s aim is to provide 3 million more apprenticeships by 2020 and to improve the quality of those apprenticeships. More detail will be contained in the Finance Bill due to be published on 9 December and which will hopefully clarify who is an “employer” and who is included in their pay bill for these purposes.
• Employment intermediaries and tax relief for travel and subsistence: The Government has confirmed that it will legislate to restrict tax relief from 6 April 2016 for travel and subsistence expenses for workers engaged through an employment intermediary such as an umbrella company or a personal service company. Following consultation, relief will be restricted for individuals working through personal service companies where the intermediaries legislation applies. Whilst further anticipated reforms around IR35 and the use by individuals of personal service companies was not mentioned specifically today developments in this regard are by no means off the agenda.
• Action on the growth in salary sacrifice arrangements: This continues to remain on the Government’s agenda but it is still “considering what action if any is necessary”. It will confirm its approach once it has gathered further evidence including from employers.
• Review of employment status: The Autumn Statement confirms that the Government has responded to the final report of the Office of Tax Simplification review of employment status and is taking forward the majority of recommendations. We shall await more detail in this regard.
• Supporting working families: The Government remains committed to extending tax free childcare for working parents of 3 and 4 year olds from 15 hours to up to 30 hours per week from September 2017 and introducing tax free childcare from early 2017 providing up to £2000 a year per child to help with childcare costs. However, to ensure this is affordable, to qualify, each parent must earn less than £100,000 (it was formerly proposed to be £150,000) and the minimum income level per parent is increased from the equivalent of 8 hours to 16 hours at the new National Living Wage rate. Changes are also made to ensure eligibility where a parent or their partner is in work but the other parent is disabled or a carer or where a parent or their partner is taking time away from work on paid sickness or parental leave.
• Supporting ill and disabled workers: The Government will publish a White Paper in 2016 that will set out reforms to improve support for people with health conditions and disabilities including exploring the roles of employers to further reduce the disability employment gap and promote integration across health and employment. New ways will be piloted to join up health and employment systems and the Fit for Work Scheme will be extended. Mental health also remains high on the agenda with the Government committing to spend £6million on “talking therapies” within the NHS.
• Employer provided living accommodation: The Government has committed to a call for evidence on the current tax treatment of employer provided living accommodation.

Whilst the Government committed to consult further on reducing the costs of redundancy pay-outs in the public sector, there was no mention of any wider reforms to the tax treatment of termination payments which has recently been the subject of consultation. It may be that we shall see more on this in the coming months.

For further information on any of the above issues please do not hesitate to contact your usual OC Contact.