Budget 2021 | Employment Tax announcements

Employment Tax announcements from the 2021 Budget

Extension of furlough arrangements

• Scheme extended to 30 September 2021.
  
  
• Currently employer claims 80% of reference pay.
  
  
• Employer will be required to contribute 10% from 1 July 2021, and 20% for August 2021 and September 2021 (with the employees still receiving 80%).

This measure will ensure employees are no worse off than currently but will increase the cost burden for the business as the scheme winds down to 30 September. The key question is whether businesses will be able to continue employees in the same numbers where trade up take is sluggish with increasing employee cost.

Extension of working from home expenses

• Employer reimbursed expenses covering the cost of home office equipment extended to 2021/2022 tax year.
  
  
• No reference made to the extension of the £6 per week working from home allowance for 2021/2022.

This is a welcome and not unexpected extension to the relief for the cost of equipment to enable employees to work from home. The Statement is however silent on whether the £6 per week allowance, to cover ancillary heating, lighting, broadband costs is to continue to be allowed to be claimed post 6 April. The original extension of this relief was to end on 5 April 2021. One would hope that although this has been excluded from the statement this further relief will remain available.

 Flexibility for businesses attracting and engaging apprentices

• An additional £126m in England for the high quality work placements and training for 16-24 year olds in the 21/22 academic year.
  
  
• Employers providing trainees with work experience will continue to be funded at £100 per trainee.
  
  
• Employers who hire a new apprentice between 1 April and 30 Sept 2021 will receive £3000 per new hire. This is compared with £1500 (£2000 for those aged 24 or under) for new hires under the old scheme.
  
  
• This is in addition to the existing £1000 for all new apprentices with an Education, Health and Care plan.
  
  
• The Government is also introducing a £7m fund from July 2021 to help employers in England set up and expand portable apprenticeships. This is intended to help people work across multiple projects with different employers.

These are welcome additions to current arrangements intended to encourage more apprentice uptake and flexibility across employers.

National Living Wage changes

• From April 2021, NLW will increase by 2.2% to £8.91 per hour.
  
  
• This was previously for workers aged 25 and over, but now it will apply to workers aged 23 and over.
  
  
• This will add to employer costs which may inadvertently impact jobs.

Again this is an extension to bring further employees within scope in the 23-25 age range.

 Taxpayer Protection Taskforce

• The Government is spending £100 million on this new taskforce.
  
  
• The aim is to tackle fraudsters who have exploited the COVID related support schemes including the Job Retention Scheme (JRS).
  
  
• This will increase the number of investigations carried out on previous JRS claims with the likelihood of more fines as the Governments seeks to recoup some of the £53.8 billion they have paid out through the JRS.
  
  
• HMRC are already investigating a significant number of cases and this further investment signifies clear intent of further scrutiny by them in this area.

This feels like a significant statement with the reviews carried out to date justifying further investment into reviews in this area. We are seeing a lot of HMRC enquiries. Businesses should be on higher alert that the chances of review are likely to increase significantly.

IR35 implementation

• As expected IR35 changes that come into place from April 2021 are still going ahead contrary to some lobbyists expectations.
  
  
• Preparations should continue now that there is certainty that IR35 will proceed in the private sector.

This provides certainty around the implementation of IR35 changes in the private sector for medium and large businesses. Looking at the Budget reference to enablers of tax avoidance this may well mean that exotic schemes designed to sidestep IR35 will come under detailed HMRC scrutiny.