Employees
Company cars and fuel
No further changes were announced in relation to the taxation of company cars and fuel. Car benefits remain fixed until the end of 2024/25.
IR35 – ‘off payroll working’
The rules known as ‘IR35’ were introduced in April 2000 in an attempt to prevent tax avoidance through ‘disguised employment’. An individual working through a company and extracting the profits in the form of dividends could save significant amounts of income tax and National Insurance Contributions in comparison to someone doing the same work as an employee covered by the PAYE system. The intention of the rules was to charge Income Tax and NIC on workers based on the nature of their relationship with the payer of the remuneration, irrespective of whether the worker contracts with the engager directly or via a company. If the relationship would be regarded as an employment contract in the absence of the personal service company, the contractor’s company (broadly) has to account for payroll taxes on that income.
These rules have been controversial since their introduction and difficult to enforce. In an attempt to close perceived loopholes, the government transferred the responsibility for deciding what was ‘equivalent to an employment contract’ from the worker to the engager for public sector bodies in 2017 and larger private sector engagers in 2021. This has continued to be controversial; the ‘Plan for Growth’ includes the repeal of the 2017 and 2021 changes under the heading ‘taking complexity out of the tax system’.
This does not amount to the repeal of IR35 itself; rather, from 6 April 2023 someone working through a personal service company will once again be responsible for deciding whether they are caught by the rules. The government says that ‘this will free up time and money for businesses that engage contractors, that could be put towards other priorities. The reform also minimises the risk that genuinely self-employed workers are impacted by the underlying off-payroll rules.’
This measure is costed at just over £1 billion in 2023/24, rising to over £2 billion in 2026/27. Presumably HMRC will continue to police the rules as they have since 2000, taking cases to the Tax Tribunals where they consider workers have incorrectly classified themselves as effectively self-employed. The burden of tax and penalties for getting the decision wrong will shift from the engager back to the personal service company, as several high profile disputes involving media personalities have illustrated in recent years.
Company Share Ownership Plans (CSOP)
From April 2023, qualifying companies will be able to issue up to £60,000 of CSOP options to employees, double the current limit. Some restrictions will be eased to align the rules more closely to the Enterprise Management Incentive scheme and widen access to CSOP for ‘growth companies’.