The Autumn Statement delivered last week by the Chancellor, Philip Hammond, included a number of measures relating to employment.
‘Employee shareholder’ status (ESS) was introduced in September 2013 as a new category of worker status. Employee shareholders can forgo a number of employment protections, such as the right to a redundancy payment and protection from unfair dismissal, in return for a minimum of £2,000 of shares in the employer's business. Currently, ESS shares qualify for certain income tax and capital gains tax (CGT) reliefs, but the CGT relief was restricted, following the 2016 Budget, in relation to agreements entered into after 16 March 2016, to a lifetime allowance of £100,000. The Government now plans to abolish these reliefs for ESS shares acquired in consideration of an ESS agreement made on or after 1 December 2016.
"The Government has confirmed that it is to limit the benefits that attract tax and national insurance (NI) advantages when provided as part of a salary sacrifice arrangement. The benefits that can continue to benefit from tax and NI relief if provided through salary sacrifice will be limited to enhanced employer pension contributions to registered pension schemes (and pensions advice); childcare benefits (employer-supported childcare and provision of workplace nurseries); cycles and cyclists' safety equipment provided under the cycle to work scheme; and ultra-low emission cars," highlights Head of Employment Paul Burton, "the limitation will take effect from April 2017," he adds.
The Autumn Statement also confirmed that, as announced at the 2016 Budget, the exemption from income tax and NI for termination payments up to the current threshold of £30,000 will be retained but employer NI contributions will be payable on payments above £30,000 from April 2018. It appears that the Government has dropped its controversial proposal to tax certain ‘post-employment’ and ‘expected-bonus’ payments as earnings, confirming that income tax will only be applied to the equivalent of an employee’s basic pay if their notice is not worked.
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