UK: Consultations on tax treatment of termination payments, IR35 and Sunday trading

The Summer Budget announced a number of forthcoming consultations which have now been published:

The HMRC consultation on simplifying the tax and NICs treatment of termination payments, for views by 16 October 2015, is available here. The proposals include:

• to remove distinctions between contractual and non-contractual payments;
• to replace the current £30,000 allowance with an exemption for redundancy (voluntary or compulsory) at a rate rising in line with length of service subject to a minimum of 2 years’ service;
• to introduce new exemptions (possibly subject to a cap) for wrongful dismissal, unfair dismissal and discrimination;
• to remove most of the other exemptions (except the existing illness, disability and armed forces exemptions); and
• to introduce anti-avoidance provisions.

The government also seeks views on possible alignment of income tax and NICs rules. Although simplification is welcome, the proposals are likely to mean an increase in the cost to employers of terminations, where employees seek to negotiate a higher overall sum on the basis that exemptions are no longer available. The outcome of the consultation is expected to be announced in the Autumn 2015 statement.

The HMRC has also published a discussion document on how to improve the effectiveness of the existing employment intermediaries legislation (‘IR35’), seeking views by 30 September. Options include administrative changes, increased involvement by engagers in ensuring the correct amount of tax is paid and/or a limitation in the scope of what falls within IR35 to engagements above a certain duration, with a possible adoption of the deemed employment criteria set out in the intermediaries legislation (the consultation document is here).

Finally, the Budget also announced a consultation on devolving powers on Sunday trading to city mayors and local authorities; the consultation document was published here on 5 August.