The government’s proposed changes to the taxation of termination payments are ‘likely to confuse workers and confound employers’, says the CIOT in its response to the draft Finance Bill 2017 legislation, published for consultation until 7 October.
The CIOT is disappointed that the proposed rules, which are due to come into effect from April 2018, have not taken more account of the recommendations contained in the Office of Tax Simplification (OTS) report on employee benefits and expenses, published in July 2014. In particular:
new rules aimed at taxing non-contractual pay in lieu of notice, which presently falls within the £30,000 exemption, will require employers to estimate an employee’s ‘expected bonus income’, adding complexity;
proposals to impose employer NICs on termination payments in excess of £30,000 will raise additional revenue, despite the OTS recommendation that any changes should be revenue neutral;
the introduction of employer-only NICs on termination payments over £30,000 will cause confusion as to when payments are liable to employer NIC, employee NIC, both or neither; and
the foreign service relief exemption remains ‘relevant and necessary’ and plans to abolish it should be reconsidered.
If these proposals are passed, the CIOT’s view is that: ‘It will represent an opportunity missed by the government to streamline an area which has proved complex for HMRC and taxpayers alike over many years.’
The government’s proposed changes to the taxation of termination payments are ‘likely to confuse workers and confound employers’, says the CIOT in its response to the draft Finance Bill 2017 legislation, published for consultation until 7 October.
The CIOT is disappointed that the proposed rules, which are due to come into effect from April 2018, have not taken more account of the recommendations contained in the Office of Tax Simplification (OTS) report on employee benefits and expenses, published in July 2014. In particular:
new rules aimed at taxing non-contractual pay in lieu of notice, which presently falls within the £30,000 exemption, will require employers to estimate an employee’s ‘expected bonus income’, adding complexity;
proposals to impose employer NICs on termination payments in excess of £30,000 will raise additional revenue, despite the OTS recommendation that any changes should be revenue neutral;
the introduction of employer-only NICs on termination payments over £30,000 will cause confusion as to when payments are liable to employer NIC, employee NIC, both or neither; and
the foreign service relief exemption remains ‘relevant and necessary’ and plans to abolish it should be reconsidered.
If these proposals are passed, the CIOT’s view is that: ‘It will represent an opportunity missed by the government to streamline an area which has proved complex for HMRC and taxpayers alike over many years.’
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