2014: Employment taxes, Avoidance and Evasion

Key points from the Chancellor's Autumn Statement 2014:

Employment taxes

There are no proposed changes to income tax and national insurance rates, the only impact being a small increase in the personal allowance and tinkering with the various earnings thresholds.

The only significant point is the proposed abolition of employer’s national insurance contributions for apprentices aged under the age of 25. From April 2016, an apprentice earning an annual salary of (say) £20,000 provides the employer with a national insurance saving of approximately £1,400 per annum, based on current NI rates.

This is good news for businesses, particularly in the engineering and manufacturing sector, that are wanting to invest in their future workforce.

Avoidance and Evasion

The government are introducing various proposals to further tackle tax avoidance. The main measures are as follows:

i) Diverted Profits Tax – introduction of a 25% corporation tax rate from April 2015, charged on multinational companies seeking to divert profits away from the UK. Multinational companies will also be required to report details to HMRC of their global allocation of profits and taxes paid. This will not be relevant to the majority of UK companies.

ii) Incorporation of businesses – the government are looking to restrict corporation tax relief for companies where goodwill is acquired from a related individual or partnership, with immediate effect. This will have tax consequences for individuals and partnerships considering transferring their business into a limited company.

iii) Umbrella companies – the government intends to issue a discussion paper on “umbrella companies” where workers currently receive a tax deduction for home to work travel which would not otherwise be available if the individuals were not classed as employed by the umbrella company. This may have a significant impact on the tax position of such workers who may no longer be entitled to claim a deduction for travel costs.

For more information or to discuss details in further, please contact  scott.burkinshaw@shorts.uk.com.